ABSTRACT
Accountants use the term 'allocation' in at least two distinctly different ways. In one sense, allocations are decisions about the disposition of resources between alternative applications; these might perhaps be called distributional allocations. Cash flow statements containing distributional allocations must be interpreted with great care. Cash flow statements can have empirical or quasi-empirical referents. However, economic interaction affects cash flows as well as costs and revenues. Individual cash flows which are subject to interaction are not uniquely determined by the underlying economic events with which they are associated. It has been emphasized that however distributional allocations are handled; cash flow statements will have empirical referents. It is not, however, the intention of the author to undermine the development of cash flow reporting; the construction of measures which have empirical referents would represent a substantial advance in the development of financial accounting.
