Re-orienting the Statement of Cash Flows Around Cash Flows to Equity Holders

This paper argues that the Statement of Cash Flows should be re-oriented around the concept of Cash Flows to Equity Holders. This re-orientation seems attractive for conceptual and internal consistency reasons. The Income Statement and the Balance Sheet are already oriented around reporting the residual claim of equity holders. Thus, re-orienting the Statement of Cash Flows around Cash Flows to Equity Holders naturally aligns it with the other two principal financial statements. The change also has considerable practical appeal for major users of financial reporting, especially investors who are interested in equity cash flows for forecasting and valuation. Finally, the proposed change is unusually easy to implement, essentially limited to different presentation of already existing information.