Issues in Funds Statement Presentation.

Abstract ABSTRACT: An examination of the literature and published financial statements discloses that the distinctions among operating, financing, and investing activities, as well as the distinctions between central operating activities and peripheral or incidental operating activities, are ambiguous for income statement and funds statement purposes, notwithstanding recent FASB efforts at clarification. Manifestly, the same distinctions among these activities should be applied consistently in both the income statement and the funds statement. This paper examines some of the problems in achieving such consistency, largely within the context of the recently proposed financial reporting framework of the FASB. Additionally, this paper examines the funds statement presentation of the income tax effects of operating, financing, and investing activities. It is demonstrated that income taxes should be allocated within the funds statement among these activities, much as income taxes are already allocated within the income statement between income from continuing operations and extraordinary items.