Significant Investing

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

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.