Cashflow statement meaning

A cashflow statement (also called a statement of cash flows) is the section of a company’s annual report that sets out cash and cash-equivalent inflows and outflows for the period, grouped into operating, investing and financing activities. It explains how cash was generated and used during the financial year, complementing the profit and loss account and balance sheet. In the UK and Ireland this is an accounting, not a statutory, term. Its content and presentation are set by accounting standards: IAS 7 under IFRS (as adopted in the UK for UK issuers and in the EU for Ireland) and Section 7 of FRS 102. Small entities using FRS 102 1A and micro-entities under FRS 105 are generally exempt from presenting a cashflow statement. The Companies Act 2006 (UK, including Northern Ireland) and Companies Act 2014 (Ireland) require accounts to give a true and fair view and rely on these standards. Practically, lawyers use the cashflow statement in financial due diligence, assessing liquidity, going concern and insolvency risk, testing financing covenants (e.g., DSCR, free cash flow), and informing distributions, solvency statements and M&A completion mechanics. Usage is broadly consistent across England & Wales, Scotland, Northern Ireland and Ireland.