Global Journal of Management and Business Research, C: Finance, Volume 22 Issue 5

In 1989, GASB Statement No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, was issued. GASB 9 established new guidelines for governments in preparing cash flow statements. This course section includes the following: GASB 9, 34 and 35, The Purpose of the Statement of Cash Flows, Fund types affected, Cash and Cash Equivalents, Direct Method and What is a cash flow? In GASB 9, 34 and 35, there were four categories of aggregation of assets: Cash flows from Operating Activities Cash flows from Noncapital Financing Activities Cash flows from Capital and Related Financing Activities Cash flows from Investing Activities The cash flow statement did not cover governmental activities and was therefore governed by SFASN. 95 provided for only three types of activities according to which the sources and requirements expressed in terms of cash were to be aggregated: *operating activities *investment activities *financial activities The definitions of operating, investing and financial activities recall what was already proposed by IAS 7 and IAO (Italian Accounting Organism, in the Italian language OIC) No. 10. For the sake of completeness, what is defined explicitly in the FASB's SFAS 95 document is reiterated here: “Cash Flows from Investing Activities Investing activities include making and collecting loans and acquiring and disposing of debt or equity instruments and property, plant, and equipment and other productive assets, that is, assets held for or used in the production of goods or services by the enterprise (other than materials that are part of the enterprise's inventory). Page 7 Cash inflows from investing activities are: 1. Receipts from collections or sales of loans made by the enterprise and of other entities' debt instruments (other than cash equivalents) that were purchased by the enterprise 2. Receipts from sales of equity instruments of other enterprises and from returns of investment in those instruments 3. Receipts from sales of property, plant, and equipment and other productive assets. Cash outflows for investing activities are: 1. Disbursements for loans made by the enterprise and payments to acquire debt instruments of other entities (other than cash equivalents) 2. Payments to acquire equity instruments of other enterprises 3. Payments at the time of purchase or soon before or after purchase to acquire property, plant, and equipment and other productive assets. Cash Flows from Financing Activities Financing activities include obtaining resources from owners and providing them with a return on, and a return of, their investment; borrowing money and repaying amounts borrowed, or otherwise settling the obligation; and obtaining and paying for other resources obtained from creditors on long-term credit. Cash inflows from financing activities are: 1. Proceeds from issuing equity instruments 2. Proceeds from issuing bonds, mortgages, notes, and from other short- or long-term borrowing. Cash outflows for financing activities are: 1. Payments of dividends or other distributions to owners, including outlays to reacquire the enterprise's equity instruments 2. Repayments of amounts borrowed 3. Other principal payments to creditors who have extended long-term credit. Cash Flows from Operating Activities Operating activities include all transactions and other events that are not defined as investing or financing activities in paragraphs 15-20. Operating activities generally involve producing and delivering goods and providing services. Cash flows from operating activities are generally the cash effects of transactions and other events that enter into the determination of net income. Cash inflows from operating activities are: 1. Cash receipts from sales of goods or services, including receipts from collection or sale of accounts and both short- and long-term notes receivable from customers arising from those sales 2. Cash receipts from returns on loans, other debt instruments of other entities, and equity securities— interest and dividends 3. All other cash receipts that do not stem from transactions defined as investing or financing activities, such as amounts received to settle lawsuits; proceeds of insurance settlements except for those that are directly related to investing or financing activities, such as from destruction of a building; and refunds from suppliers. Cash outflows for operating activities are: 1. Cash payments to acquire materials for manufacture or goods for resale, including principal payments on accounts and both short- and long- term notes payable to suppliers for those materials or goods 2. Cash payments to other suppliers and employees for other goods or services 23 Global Journal of Management and Business Research Volume XXII Issue V Version I Year 2022 ( ) C © 2022 Global Journals Does the Formal Structure of the Cash Flow Statement have an Impact on the Understanding of the Data Contained in the Report Explaining the Company's Financial Dynamics?