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IAS 34 — Condensed statement of cash flows

Date recorded:

In March 2014, the Committee published a tentative agenda decision not to add to its agenda a request to clarify the requirements regarding the presentation and content of the condensed statement of cash flows in the interim financial statements according to IAS 34 'Interim Financial Reporting'.

The purpose of this paper was to provide an analysis of the comments received on the tentative agenda decision, and set out the wording for the final agenda decision.

The Committee was asked whether it agreed with the staff recommendation to finalise the agenda decision.

The Project Manager introduced the paper and asked the Committee members whether they had any comments on the paper and whether they agreed with the staff recommendation in the paper.

A Committee member commented on the wording in the penultimate paragraph of the proposed final agenda decision “…and that a three-line presentation would generally not meet the requirements in IAS 34”.  He questioned what message the Committee was trying to convey by using the word ‘generally’, and specifically whether the Committee was saying three-line presentation was permissible or not. 

The ESMA representative present agreed that it was difficult to interpret what the sentence was saying.  He suggested that if the Committee wanted to convey that three-line presentation would not be in accordance with IAS 34, then some of the discussion in paragraphs 26, 27, and 28 of the agenda paper should be incorporated into the final agenda decision.

The Senior Director, Technical Activities noted that the word ‘generally’, was saying that it would be rare that a three-line presentation would meet the requirements in IAS 34, but there could be a time when the requirements were met.  He noted that using the word generally was saying that three-line presentation was permissible, which was consistent with IAS 34.  He further noted that instead of using the word ‘generally’, the word ‘unlikely’ could be used, which indicates that situations where a three-line presentation would meet the requirements in IAS 34 would be a small set, and that in most cases more than three lines would be necessary.

The ESMA representative present suggested adding a reference to paragraph OB20 of the Conceptual Framework and the comments at the end of paragraph 28 of the agenda paper “… we think that the current requirement to present information about the entity’s performance includes information about the entity’s cash flows” to the agenda decision.  He noted that this would make clearer the judgement the Committee made and avoid readers using the agenda decision to argue that three-line presentation was acceptable.

The Chairman summarised the discussion, noting that Committee decided that there may be situations where only a three-line cash flow statement was needed, but this would be a very small set of the population.  He suggested changing the emphasis of the paragraph to state that it would be unlikely to meet the requirements, or only in rare circumstances would it meet the requirements – because the Committee could not prohibit a three-line cash flow statement as that was not in accordance with IAS 34.

In response to the above comments, a Committee member noted that if the Committee used wording such as “in rare circumstances”, this would serve to limit the instances in which three-line presentation would be appropriate.

Another Committee member noted that he agreed with the agenda decision, and that it provided directional guidance and principles.  He noted that the Committee could not set a bright line as that would be inconsistent with IAS 34, but that the agenda decision pointed out some of the broader principles in IAS 34 that would make it a very high bar before one could justify a three-line cash flow statement.

Another Committee member suggested that it could be useful to clarify in the agenda decision that financial performance included cash flows, as there were a number of people who believed that financial performance and position only included balance sheet and income statement. 

Based on the preceding discussion, the Chairman proposed that language could be incorporated into the agenda decision to clarify that financial performance as it is used in IFRS includes cash flows.  All fourteen Committee members present agreed with this proposal.

The Chairman also proposed changing the wording in the penultimate paragraph from “generally” to “rarely/unlikely”.  Eight Committee members agreed with this proposal.

Correction list for hyphenation

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