Statement of Cash Flows and

Consolidated Statements

Cash and Cash Equivalents

Classification

Operating

Investing

Financing

Direct vs. Indirect

Direct• report major

classes of receipts/payments

Indirect• reconcile net

income to net cash

Consolidated Financial Statements

Corporation

Affiliate

Consolidation Abuse

• Must consolidate “controlled” subsidiaries

• Definition of “control” has changed from quantitative to qualitative

Elimination

• Parent’s “Investment in Subsidiary” account is replaced with the subsidiary’s assets and liabilities

Development of Accounting PrinciplesGAAP = Generally Accepted Accounting Principles

The Players

Accounting vs. Auditing

The Role of Congress