FRS 1 Cash Flow Statements

FRS 1 (Revised 1996) (October 1996) (PDF)

FRS 1 (Revised 1996) was effective for accounting periods ending on or after 23 March 1997. It was withdrawn for accounting periods beginning on or after 1 January 2015, when FRS 102 became effective. 

FRS 1 (Revised 1996) requires reporting entities within its scope to prepare a cash flow statement in the manner set out in the FRS. Cash flows are increases or decreases in amounts of cash, and cash is cash in hand and deposits repayable on demand at any qualifying institution less overdrafts from any qualifying institution repayable on demand.

An entity's cash flow statement should list its cash flows for the period classified under the following standard headings:

  • Operating activities
  • Returns on investments and servicing of finance
  • Taxation
  • Capital expenditure and financial investment
  • Acquisitions and disposals
  • Equity dividends paid
  • Management of liquid resources
  • Financing

An appendix to the standard sets out examples of cash flow statements for an individual company, a group, a bank and an insurance group.

FRS 1 (Revised 1996) replaced the original FRS 1 which was issued in September 1991 to replace SSAP 10 'Statements of source and application of funds'. At the time the requirement for a cash flow statement instead of a statement of source and application of funds represented a radical change in financial reporting. However, cash flow statements had increasingly come to be recognised as a useful addition to the balance sheet and profit and loss account in their portrayal of financial position, performance and financial adaptability (in particular in indicating the relationship between profitability and cash-generating ability) and thus of the quality of the profit earned.