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

* ASC Principle 230 also reiterates the possibility of applying either the direct or indirect method when preparing cashflow reporting. Also in this principle, the direct method is encouraged over the indirect method. * Some subtopics concerning particular issues are indicated in topic 230. In particular, the following sub-topics are provided for in the topic above 1. Foreign Currency Matters, Subtopic 830-230 2. Development Stage Entities, Subtopic 915-230 3. Entertainment—Films, Subtopic 926-230 4. Financial Services—Depository and Lending, Subtopic 942-230 5. Financial Services—Investment Companies, Subtopic 946-230 6. Not-for-Profit Entities, Subtopic 958-230 7. Real Estate—General, Subtopic 970-230 8. Real Estate—Time Sharing Activities, Subtopic 978-230. IV. O bservations, M erits and I nformational L imitations of the S tructures P roposed by I nternational, A merican and I talian A ccounting S tandards and a P roposal for an A dequate C ash F low S tatement as part of an I ntegrated I nformation S ystem for both I nternal C ompany M anagers and E xternal T hird P arties As we have seen in the previous pages, the IASB, the FASB, the Italian civil code and the IAO (Italian Accounting Organism (Henceforth IAO, in Italian language OIC)) have issued accounting standards that converge towards a structure that, although characterised by changes and peculiarities related to each specific scheme, present a substantial coherence and homogeneity of the overall vision of the cash flow statement. At present, all accounting standards require aggregating items into three activities: operating, investing and financing. The issuance of accounting standards applied in more or less extended groupings of nations is positive in that it ensures that the statement disseminated outside the company is homogeneous for all companies. This is the most outstanding merit of all the accounting standards mentioned and analysed in the preceding pages, which provide for a reference scheme or a series of indications that, although without indicating a mandatory method, lead to the drafting of consistent and similar formal structures. This structure consistency represented the most outstanding merit of the financial statements governed by the bodies mentioned above and illustrated in the preceding pages. At this point, however, one must ask oneself whether the structure proposed by the bodies as mentioned above is effectively informative for the internal managers who have to manage the company and for third parties external to the company who see the cash flow statement disseminated as an element of financial reporting, the only information tool capable of providing news about the financial dynamics of the company. In reality, various information gaps can be identified in the schedules governed by the bodies as mentioned above and, therefore, in the financial statements proposed, either in the form of a mandatory or recommended program as in Italy or the form of a mere list of illustrative items as in the IAS and ASC international standards. These shortcomings prevent an overall understanding of the company's situation. In summary terms, we can state that the main weaknesses are as follows: In defining operating activities, all of the accounting mentioned above standards do not give a precise definition that is easily understood by those who have to draw up the document. The cash flow of operating activities is, in fact, often contaminated by the cash flow effects of investment and financing operations, including tax effects related to these operations The definition of investing activities and financing activities is also non-specific. Therefore, the flows of investing activities can also be continuously contaminated by the tax effects of the other mentioned activities. The location of interest is often explained with additional indications concerning the primary signs of the documents that lay down the rules for preparing the cash flow statement. The doctrine has pointed out how it would have been appropriate to ensure that, for example, all interest was included, in all standards, as financing outflows, in the context of financing activities without assuming different options and not indicating this information as quasi-supplementary information to the basic scheme that is explained by the basic rules of the standards For some scholars, the principles should envisage purchases and sales of short-term non-trading debt securities as financing flows together with receipts of interest on these because these flows result from the fact that there are surplus cash balances, which is 25 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?