Cash Flow Statement Guide

Cash Flow Statements 53
Accounting Standard (AS) 3
Cash Flow Statements
(Thi
s
A
ccountin
g
S
tanda
r
d include
s
p
aragraph
s
s
et in bold
t
alic type
and plain type, which have equal authority. Paragraphs in bold italic
type indicate the main principles. This Accounting Standard should b
e
read in the context of its objective and the General Instructions
contained in part A of the Annexure to the Notification.)
This Accounting Standar
d
is not mandato
r
yfo
r
Small an
d
Mediu
m
Size
d
Companies, as defined in the Notification. Such companies are howeve
r
encoura
g
e
d
to compl
y
with the Standard.
Ob
j
ective
Information about the cash flows of an enterprise is useful in providing users
of financial statements with a basis to assess the ability of the enterprise
to generate cash and cash equivalents and the needs of the enterprise t
o
utilise those cash flows. The economic decisions that are taken by user
s
require an evaluation of the ability of an enterprise to generate cash an
d
cash equivalents and the timing and certainty of their generation.
The Standard deals with the provision of information about the historica
l
changes in cash and cash equivalents of an enterprise by means of a cas
h
flow statement which classifies cash flows during the period from operating
,
investing and financing activities.
Scope
1. An enterprise should prepare a cash flow statement and should
p
resent it for each period for which financial statements are
p
resented.
2. Use
r
s of an enterprise’s financial statements a
r
eintereste
d
in how the
enterprise generates and uses cash and cash equivalents. This is the cas
e
regardless of the nature of the enterprise’s activities and irrespective o
f
whether cash can be viewed as the product of the enterprise, as may be th
e
case with a financial enterprise. Enterprises need cash for essentially th
e
same reasons, however different their principal revenue-producing activitie
s
might be. They need cash to conduct their operations, to pay their obligations
,
and to provide returns to their investors.
Page 3/24
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