Re-Orienting the Statement of Cash Flows around Cash Flows to Equity Holders

17 Pages Posted: 22 Sep 2017

See all articles by Ilia D. Dichev

Ilia D. Dichev

Emory University - Department of Accounting

Date Written: September 21, 2017

Abstract

This paper argues that the Statement of Cash Flows should be re-oriented around the concept of Cash Flows to Equity Holders. This re-orientation seems attractive for conceptual and internal consistency reasons. The Income Statement and the Balance Sheet are already oriented around reporting the residual claim of equity holders. Thus, re-orienting the Statement of Cash Flows around Cash Flows to Equity Holders naturally aligns it with the other two principal financial statements. The change has also considerable practical appeal for major users of financial reporting, especially investors who are interested in equity cash flows for forecasting and valuation. Finally, the proposed change is unusually easy to implement, essentially limited to different presentation of already existing information.

Keywords: Statement of Cash Flows, Cash Flows to Equity Holders

JEL Classification: M41

Suggested Citation

Dichev, Ilia D., Re-Orienting the Statement of Cash Flows around Cash Flows to Equity Holders (September 21, 2017). Available at SSRN: https://ssrn.com/abstract=3040801 or http://dx.doi.org/10.2139/ssrn.3040801

Ilia D. Dichev (Contact Author)

Emory University - Department of Accounting ( email )

1300 Clifton Road
Atlanta, GA 30322-2722
United States

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