The Association of Chartered Certified Accountants (ACCA) has welcomed efforts to update IAS 7, the international standard on cash flow statements.
The move comes after new academic work highlighted the value of cash flow information for assessing liquidity, solvency and financial flexibility, as well as its documented links with market outcomes such as share prices, returns and indicators of financial distress.
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A report by academics from the British Accounting and Finance Association’s Financial Accounting and Reporting Special Interest Group (FARSIG) draws on empirical academic literature pointing to these relationships. The findings reinforce the role of cash flow reporting in helping users evaluate companies’ financial resilience.
The report, The Future of Financial Reporting 2026: The Statement of Cash Flows, concludes that while the cash flow statement is informative, IAS 7 does not consistently meet users’ needs and leaves room for improvement.
It highlights opportunities to enhance clarity, cohesiveness and comparability – particularly around non-cash movements, working capital changes, exceptional items and net debt.
One key recommendation is to require extra disclosures including reconciliations of net debt to give investors and other users a clearer view of financing structures and leverage.
The report appears as the International Accounting Standards Board (IASB) considers possible revisions to IAS 7, Statement of Cash Flows.
The project was added to the IASB’s work plan after users identified cash flow reporting as a high priority topic.
FARSIG chair Christian Stadler said: “FARSIG’s symposium this year explored the cash flow statement, including its relationship with sustainability reporting, critically examining how cash flows and ESG [environmental, social and governance]-related information could be integrated.
“The discussion addressed both the opportunities and challenges associated with this statement, highlighting how accountancy professionals could leverage it to enhance the relevance and reliability of corporate reporting practices.
“All this underlines how academics are well placed to work with the IASB on this issue.’”
Symposium discussions indicated that IAS 7 is not consistently aligned with what users want from the cash flow statement.
By contrast, many preparers reportedly see the cash flow statement mainly as a compliance requirement.
This mindset contributes to a gap between what is reported and how users prefer to analyse performance and risk.
Against this backdrop, the ACCA and symposium participants voiced support for the IASB’s efforts to make cash flow reporting more decision-useful and reflective of economic reality.
ACCA Sustainable Business, Policy and Insights head Sharon Machado said: “FARSIG’s work this year raises interesting questions about the relationship between earnings and cash flows, and the impact of social and environmental factors on organisations’ current and future cash flows.”
