The cash flow statement can be presented in two ways: the direct and indirect methods

Both methods result in an ending cash balance which ties to the balance sheet. The main difference between the two methods is their presentation. Breakout between the two methods are as follows:

For most individual entities at Indiana University, there will be very little activity flowing through the financing section of the cash flow statement other than activity for the income statement transfer object codes – 1699 and 5199

For internal presentation of the cash flow statement in the Controller’s Office Reporting Tools, the indirect method is used and users do not have the option to change the cash flow presentation method. For internal purposes, users will not be asked to use the direct method. Refer to Indiana University’s Consolidated Annual Financial Reports for a more detailed example on the direct method presentation.

Below is a comparative example of the direct and indirect cash flow methods of presentation, noting that the ending cash balances remain the same in either method. While the headings are the same, also note how the lines that make up the calculations differ especially under Cash Flows from Operating Activities.

Cash Flow Statement General Format

The cash flow statement is a mechanism used to present the cash activity, cash received (inflow) and the cash spent (outflow), in an organized and consolidated manner. In either cash flow presentation method, changes in cash activity are classified in three separate categories: changes in operating, investing and financing activities.

Cash Flow from Operating Activities – operating cash flows mainly related to transactions that come from the income statement. Examples of operating activities on the cash flow statement include cash inflows from students paying their tuition for the semester and cash outflows related to payments to suppliers through BUY.IU.

Cash Flow from Investing Activities – investing cash flows related to the purchase and sales of investments and long term/capital assets. Regardless of which presentation method is used for the cash flow statement, the investing activity will be presented in the same manner. For most users at Indiana University, the only activity that should be flowing through investing activities is related to the purchase or sale of a capital asset. A breakout of the activity that is generally included in the investment category on the consolidated financial statements is listed below:

Examples of cash inflows would be the issuing of a new bond offering and cash outflow would be the monthly payment for a building lease.

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