The Association of Chartered Certified Accountants has signaled support for changes to IAS 7, the international standard governing cash flow statements, after academics and practitioners highlighted gaps between what users need and what preparers deliver. New research gathered at a recent symposium argues cash flow reporting can better reflect liquidity, solvency and economic reality, and pushes the International Accounting Standards Board to close consistency and disclosure gaps. The conversation now centers on clearer disclosures around non-cash movements, working capital, exceptional items and reconciliations of net debt.
Recent academic work points to strong links between cash flow information and market outcomes like share prices, returns and indicators of financial distress, making the case that cash flow statements deserve more attention. A report from a specialist group in the academic community reviewed empirical evidence and found that users rely on cash flows to assess financial resilience in ways current practice does not always support. Those findings make a practical argument: better cash flow reporting would sharpen investors’ and creditors’ view of a company’s real financial position.
The report, titled The Future of Financial Reporting 2026: The Statement of Cash Flows, argues that IAS 7 is informative but inconsistent with user needs and leaves room for improvement in presentation and disclosure. It highlights areas where accounting choices obscure economic substance, from the treatment of non-cash items to the way working capital shifts are explained. The authors call for greater clarity and comparability so analysts can make apples-to-apples assessments across companies and sectors.
One central recommendation is to require extra disclosures, including reconciliations of net debt, to give investors a clearer view of financing structures and leverage. That reconciliation would link balance sheet and cash flow information in a way that speaks directly to debt dynamics and liquidity risk. More transparent reporting of exceptional items and movements that do not affect cash would also reduce the gap between headline earnings and actual cash generation.
The IASB has added a project to its work plan because users ranked cash flow reporting as a high priority, and the academic report arrives as the board evaluates whether IAS 7 needs revision. Preparers often treat the cash flow statement as a compliance exercise, which contributes to a consistent disconnect between reporting and analysis. Symposium participants and accounting bodies argue current practice underuses the statement’s potential to inform decisions about future cash needs and resilience under stress.
FARSIG chair Christian Stadler said: “FARSIG’s symposium this year explored the cash flow statement, including its relationship with sustainability reporting, critically examining how cash flows and ESG [environmental, social and governance]-related information could be integrated. “The discussion addressed both the opportunities and challenges associated with this statement, highlighting how accountancy professionals could leverage it to enhance the relevance and reliability of corporate reporting practices. “All this underlines how academics are well placed to work with the IASB on this issue.”
ACCA leaders and symposium attendees voiced support for the IASB’s push to make cash flow reporting more decision-useful and grounded in economic reality. Sharon Machado, head of Sustainable Business, Policy and Insights at ACCA, said: “FARSIG’s work this year raises interesting questions about the relationship between earnings and cash flows, and the impact of social and environmental factors on organisations’ current and future cash flows.” That line of inquiry opens the door to exploring how sustainability pressures and investments show up in operational cash generation over time.
Fixing the gap between what users want and what preparers deliver will require both technical tweaks and a shift in mindset about the statement of cash flows. If the IASB adopts clearer disclosure rules and stronger reconciliation requirements, users would gain a better toolkit for assessing liquidity and leverage. The debate now is practical: refine IAS 7 so the cash flow statement becomes a forward-looking instrument for assessing resilience, rather than a backward-looking compliance artifact.
