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The Direct Method

With the implementation of GASB 34 and 35, agencies and universities are required to prepare the statement of cash flows using the direct method.

Note: The Comptroller's office requires all state agencies to use the direct method. This method is also used on the Annual Comprehensive Financial Report (ACFR).

Under the direct method of reporting net cash flow from operating activities, the reconciliation of operating income (or net income, if operating income is not separately identified on the operating statement) to net cash flow from operating activities is presented on the face of the statement of cash flow in a separate schedule.

Next: What Constitutes a Cash Flow?