Andrew, Brian H. and Hughes, Mark, 2007, ED151, A Flawed Approach, Australasian Accounting Business and Finance Journal, 1(3), 12-21.
This paper argues the recent proposals expressed by the Australian Accounting Standard Board in Exposure Draft 151 contradicts the historical trend of standard setters attempting to achieve the objective of financial reporting, that is, the provision of decision-useful information for users of general purpose financial reports. Historically, standard setters have tried to achieve this objective by reducing alternative treatments in accounting standards and providing increasing levels of information for users. Exposure Draft 151 affects many standards, however, this paper focuses on the proposal to allow preparers the option of selecting between the direct or indirect method of presenting cash flows from operations in the statement of cash flows. We argue that this discretion contradicts the stated objective of financial reporting, as stated in the Conceptual Framework, as it will lead to the widespread adoption of the less informative indirect method, due to a structural bias in the requirements of AASB 107 and IASB 7, the relevant standards relating to the statement of cash flows.