Classification Differences Between the Operating Statement and Cash Flow Statement

The statement of cash flows is not intended to replicate, on a cash basis, the operating statement.

Instead, it is intended to compliment the accrual-basis financial statements by providing functional information about financing and investing activities. The cash flow approach concentrates on the underlying nature of a transaction.

When an agency reports similar activities in different sections of the operating statement and statement of cash flows, the difference should be shown as a classification difference in the reconciliation section of the cash flow statement. This allows the agency to successfully reconcile operating income from the operating statement to the amount reported as net cash flows from operating activity from the cash flow statement.

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