The Funds Statement: An Inquest

In 1985 Canada became the first country to replace its funds flow statement by a cash flow statement. By mid 1991, South Africa, the USA and New Zealand had done the same. Britain, Australia and the IASC all issued statements announcing their intention to follow suit. Thus we have the first example in accounting history of the replacement of one of the three final accounts by an entirely new report. The new report, the cash flow statement, when compiled under the direct method, is a receipts and payment account rearranged under the three headings of operations, financing and investment. A receipts and payments account is the earliest and simplest form of final account, long predating the profit & loss account and balance sheet, and long predating Pacioli's “De Summa Arithmetica” in 1492. The statement which the Cash Flow Statement replaces is less than 120 years old (Rosen & De Coster 1969) and was only mandatory in published British accounts since SSAP 10 came into force in 1975. The purpose of this article is to hold an inquest into the death of the funds statement to determine the cause of death.