Question: Significant investing and financing transactions occasionally occur without a cash component. Land,
for example, might be obtained by issuing common stock. Buildings are often bought through the signing of a
Don't use plagiarized sources. Get Your Custom Essay on
Just from $13/Page
long-term note payable so that cash payments are deferred into the future. Should that information be omitted
from the statement of cash flows?
If no cash is received or expended, should a transaction be reported on a statement of cash flows?
Answer: All investing and financing transactions need to be reported in some manner for the benefit of decision
makers. They represent choices made by the organization’s management. If cash is not involved, such events must
still be disclosed in a separate schedule (often just below the statement of cash flows) or explained in the notes
to the financial statements. This information is valuable to interested parties who want a complete picture of the
decisions made during the reporting period.
For example, in a note to its financial statements for the year ended April 24, 2009, NetApp Inc. disclosed the
“acquisition of property and equipment on account” of $13,152,000. Although a noncash transaction, inclusion of
the information was still important.