The major deficiency of the indirect method is that it derives the net cash flow from operating activities without separately presenting any of the operating cash receipts and payments For example. envision an income statement that begins with the change in shareholders' equity for the period and then reverses any changes in equity that did not affect profit or loss or net income such as dividends, issuance of shares, and repurchases of shares. That income statement format would arrive at the net income amount for the period too, but the state- ment would not be useful