Question about cash flow statements (1 Viewer)

[VIPPER]

I wasn't sure where to put this so I guess I'll ask here.

Net cash flows from operating activities can be obtained by two methods: direct and indirect.

The cash flow statement AASB requires companies to create cash flow statements using the direct method, so why does the indirect method exist, i.e. what is the point of the indirect method? To confirm the accuracy of net c.f. from operating activities derived from the direct method?

Thanks!

 

[seremify007]

Per para 18 of AASB 107;

An entity shall report cash flows from operating activities using
either:
(a) the direct method, whereby major classes of gross cash
receipts and gross cash payments are disclosed; or
(b) the indirect method, whereby profit or loss is adjusted for
the effects of transactions of a non-cash nature, any deferrals
or accruals of past or future operating cash receipts or
payments, and items of income or expense associated with
investing or financing cash flows.

Hope this helps clarify. Keep in mind that not all companies have a nice and simple listing of cash movements (think any financial institution for example) so instead they rely on the indirect method where they can just map GL accounts subject to any known special transactions. I can't even remember the last time I saw a direct cash flow statement.