Limitations / shortcomings in Reporting of Cash & Cash Equivalent


The Institute of Chartered Accountants of India (ICAI) has frequently observed discrepancies where financial reporting disclosures do not conform to statutory requirements or do not offer stakeholders a transparent depiction. Listed below are several identified deficiencies in reporting practices concerning Statement of Cash Flows (IND AS 7):

Shortcomings: IND AS 7 “Statement of Cash Flows”

S. No.Observation(s)Remarks has not disclosed the amount of significant cash and cash equivalents that are not available for use.Companies shall disclose, together with a commentary by management, the amount of significant cash and cash equivalent balances held by the entity that are not available for use.
2.Proceeds and repayment of term loans, current borrowings etc. were disclosed on a net basis in the statement of cash flows. Similarly, purchase / sale of investments in subsidiaries, sale/ purchase of PPE, were disclosed on net basis.Except the mentioned below shall not be disclosed on net basis: cash receipts and payments on behalf of customerscash receipts and payments for items in which the turnover is quick, the amounts are large, and the maturities are short. has not made the disclosure about changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes.Companies should disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes.”
4.A statement of cash flows is not prepared by a certain organization. Further, in some cases incorrect terminology was used for statement of cash flow.Correct terminology as per IND AS -7 is “Statement of cash flow” not “Cash Flow Statement”
5.Statement of cash flows were not reconciled with the cash and cash equivalents disclosed under the head ‘cash and bank balances’ in the balance sheet.Companies should present a reconciliation of the amounts in its statement of cash flows with the equivalent items reported in the balance sheet.
6.Interest and dividend paid/received are disclosed together instead of disclosing them separately.Cash flows from interest and dividends paid/ received shall each be disclosed separately.
SW Point of View: Companies should take steps to address the discrepancies proactively and ensure compliance with statutory provisions as Cash and cash Equivalent pose potential risk.

Shivam Pandey, Audit Associate, SW India