2 Risch Company each year prepares an income statement and b

2. Risch Company each year prepares an income statement and balance sheet. Tom Martin, the controller, issues a memo to Debbie Kreiger, vice president, that the company should prepare a statement of cash flovs. Debbie called the controller and told him that she would not tet a cash flows statement be published, that this type of information is for internal purposes only, and that the public has no right to this data. She said that the competition iould kill them if they got this information. Do you agree vith Debbie\'s position or vith Tom\'s? Compose a recommendation to Dave Risch, the CEO on hov you would proceed.

Solution

As per IFRS and as per US GAAP, it is mandatory to prepare cash flow statement by a company if it is categorized as the company whihc needs to prepare cash flow statement.

The concern of the management is not given the primary importance but the investors and the stakeholders are kept at importance over here. They have the right to know the flow of cash in the company because of their activities.

Cash flow statements are to be prepared unless the company doesn\'t fall into the category.

It would be advisable to the CEO, to let him know the rules, accounting mandates and what would be the consequences if the same are not followed and advice him about the cash flow statements preparation.