GAAP requires the statement of cash flows.

• A. False.
• B. True.
• C. Only for large associations.
• D. Only if the association has debt.

Answer: (B)

GAAP requires a statement of cash flows because it provides essential insight into actual cash movements, liquidity, and the ability to sustain operations. While the income statement shows performance on an accrual basis, the cash flow statement translates that into real cash in and out, breaking it down into operating, investing, and financing activities. For a community association, this is especially important because dues, assessments, delinquencies, and transfers to or from reserve funds can create cash patterns that don’t align with reported net income. Seeing the cash flows helps managers and stakeholders understand whether the association can meet its obligations, fund ongoing maintenance, and plan for future needs, regardless of size or debt status.