Edward F. Reifsnyder
The Reifsnyder Group
Via E-mail
Understanding Cash Flow — Or Not
The new approach to financial statements that FASB plans to propose ("A New Vision for Accounting," February) may work for large companies presenting financials to big banks and Wall Street analysts. My experience with smaller companies, however, is that their owners and top management have a hard time grasping the three categories of the cash-flow statement. To apply that concept to the income statement and the balance sheet would really blow their minds. Maybe FASB's aim is to make financial statements so complicated that only a CPA can understand them and thus create job security for some.
I am the founder and chair of the Savannah CFO/Controller's Council, which includes about 150 members, mostly from companies about $75 million in revenue or smaller. A surprising number have never seen, or prepared, a cash-flow statement. Many companies in this size range make business decisions from the P&L alone without recognizing the cash implications of the decision.
My problem with the FASB proposal is that it just adds more complication. It makes perfect sense for us bean counters, but for senior managers who don't have a strong accounting background, the FASB concept will have their eyes going around like a pea in a whistle.
H. Roy Austin
Chief Financial Officer
D.J. Powers Co.
Savannah, Georgia
CLARIFICATION
"Goodbye GAAP" (April) reported that it would cost Procter& Gamble more than $1 million to convert from generally accepted accounting principles to international financial reporting standards. In fact, such a conversion would likely cost tens of millions of dollars, according to Mick Homan, comptroller of corporate accounting at P&G.
Reader Comments» Post a comment