The direct method of preparing the statement of cash flows is recommended by the Financial Accounting Standards Board (FASB). However, the direct method is rarely used.

Recent editions of Accounting Trends & Techniques published by the American Institute of Certified Public Accountants surveyed 500 annual reports and found that less than 10 used the direct method, while more than 490 used the indirect method.

You can read the official FASB pronouncement on the Statement of Cash Flows at

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