Standard Format Indirect Method

---
name: financial-statements-standard-format-indirect-method
description: 'Sub-skill of financial-statements: Standard Format (Indirect Method)
  (+1).'
version: 1.0.0
category: business
type: reference
scripts_exempt: true
---

# Standard Format (Indirect Method) (+1)

## Standard Format (Indirect Method)


```
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)
Adjustments to reconcile net income to net cash from operations:
  Depreciation and amortization
  Stock-based compensation
  Amortization of debt issuance costs
  Deferred income taxes
  Loss (gain) on disposal of assets
  Impairment charges
  Other non-cash items
Changes in operating assets and liabilities:
  Accounts receivable
  Inventory
  Prepaid expenses and other assets
  Accounts payable
  Accrued liabilities
  Deferred revenue
  Other liabilities
Net Cash Provided by (Used in) Operating Activities

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchases of property and equipment
  Purchases of investments
  Proceeds from sale/maturity of investments
  Acquisitions, net of cash acquired
  Other investing activities
Net Cash Provided by (Used in) Investing Activities

CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from issuance of debt
  Repayment of debt
  Proceeds from issuance of common stock
  Repurchases of common stock
  Dividends paid
  Payment of debt issuance costs
  Other financing activities
Net Cash Provided by (Used in) Financing Activities

Effect of exchange rate changes on cash

Net Increase (Decrease) in Cash and Cash Equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
```


## GAAP Presentation Requirements (ASC 230 / IAS 7)


- Indirect method is most common (start with net income, adjust for non-cash items)
- Direct method is permitted but rarely used (requires supplemental indirect reconciliation)
- Interest paid and income taxes paid must be disclosed (either on the face or in notes)
- Non-cash investing and financing activities disclosed separately (e.g., assets acquired under leases, stock issued for acquisitions)
- Cash equivalents: short-term, highly liquid investments with original maturities of 3 months or less