Articulation in Cash Flow Statements: A Resource for Financial Accounting Courses

Recent accounting research (Bahnson, P., Miller, P., & Budge, B. ( 1996). Nonarticulation in cash flow statements and implications for education, research and practice. Accouming Horizons, 10, 1-15 has shown that firms implementing the indirect method for reporting cash ftows under SFAS 95 rarely produce financial statements that articulate cleanly. The purposes of this paper are (I) to provide financial accounting educators with a list of companies for which articulation does exist, (2) to describe the process by which educators can update the list in the future, or modify it to suit their own preferences, and (3) to present an analysis of firms' reporting practices on the cash flow statement, which may be of interest to more advanced students studying the complexities of the statement of cash flows. This analysis of reporting practices involves an assessment of the articulation of individual COM PUST AT line items (e.g. inventory) and subsets of line items (e.g. inventory, receivables. deferred taxes. and depreciation) for the 1998 data year. The findings indicate that relatively few firms report consistent values for single line items and that very few firms report consistent values across subsets of line items. Although the rate of articulation decreases as firm size. and hence reporting complexity, increases, 74 large, publicly-traded firms for which clean articulation does exist were identified. This list of firms should prove useful to introductory accounting educators who use real-world examples for classroom purposes.