The Sorp Revision: Cash flow

By finance expert Don Bawtree

Don Bawtree
Don Bawtree

There are two types of cash-flow statement, which affect year-end accounts. One shows whether an organisation is able to continue trading. Another appears in all large charities' accounts.

The cash-flow statement in the accounts is still required of all charities following FRS 102, and this requirement might carry through to smaller charities too. FRS 102 changes how the cash-flow statement is presented, but the changes are mainly cosmetic. However, from now on subsidiaries also have to prepare cash-flow statements.

Meanwhile, charities need to show they are going concerns. Generally, this is unaffected by a change in accounting standards, but be aware that changes in presentation often change behaviour, so if the accounts include a higher legacy receivable, for example, its visibility is likely to encourage charities to manage that debt more actively.

One of the tests of insolvency is based on the balance sheet. Because of changes to the balance sheet (see last week), trustees and auditors will start from a different position when they consider going concerns.


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