As noted in the chapter, there is international diversity in the preparation of the statement of cash flows.

_ For example, under International Accounting Standards companies may choose how to classify dividends

- and interest in the cash flow statement. In some countries, like Brazil, a cash flow statement is not required.

Embraer, a Brazilian aircraft manufacturer, prepared a statement of changes in financial position, rather than a statement of cash flows.

_ Instructions Refer to Embraer’s 2004 Statement of Changes in Financial Position below and on page 1278 to answer the following questions.

(a) Briefly discuss at least two similarities between Embraer’s statement of changes in financial position and a statement of cash flows prepared according to U.S. GAAP.

(b) Briefly discuss at least two differences between Embraer’s statement of changes in financial position and a statement of cash flows prepared according to U.S. GAAP.

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Embraer Consolidated Statement of Changes in Financial Position for the Year Ended December 31, 2004 (in thousands of Brazilian reals) Sources of Funds Provided from operations Net income Items not affecting working capital Equity in unconsolidated subsidiary Translation losses on foreign investments Minority interest Depreciation and amortization Net book value of permanent asset disposal 2004 1,255,833 19,613 8,618 221,554 799 Interest on long-term items added to principal, net (25,759) Net monetary and exchange variations on long-term items Provision for losses (201,030) 34,268 Long-term deferred income and social contribution taxes Provisions for contingencies (47,765) 57,930 Funds provided from operations 1,324,061 From shareholders Capital increase 9,524