What is a key factor when comparing group statements for cash flow calculations after acquisition?

When comparing group statements for cash flow calculations after an acquisition, it is essential to recognize that assets and liabilities must be adjusted accordingly. This adjustment is critical because the financial statements of the acquired entity will need to reflect their fair values at the acquisition date, which can significantly impact the cash flow calculations.

In a typical acquisition scenario, the acquiring company will consolidate the financial results of the acquired entity into its own financial statements. As a result, all assets and liabilities of the acquired company are recognized at their fair value, which can differ substantially from their book values. This fair value adjustment provides a more accurate picture of the financial position and performance of the combined entity.

By adjusting the assets and liabilities, it ensures that the cash flows derived from operating, investing, and financing activities accurately reflect the economic reality post-acquisition. This holistic view is vital for stakeholders to assess the true cash-generating ability of the new consolidated entity. Therefore, understanding the implications of these adjustments is key for accurate financial reporting and analysis in the context of acquisitions.