Section 2140: Statement of Cash Flows
International Accounting Standard 7
Statement of Cash Flows
1. First version of IAS 7
"Statement of changes in financial position" issued in October 1977
2. Revisions and amendments
Revised in December 1992, "Cash flow statements"
In September 2007, revised version of IAS 1 changed the title of IAS 7
"Statement of cash flows"
[U.S. GAAP Codification Topic]
205 Presentation of financial statements
210 Balance sheet
225 Income statement
230 Statement of cash flows
215 Statement of shareholder equity
235 Notes to financial statements
3. Cash and cash equivalents, IAS 7.6
Cash = cash on hand + demand deposits
Cash equivalents = short-term, highly liquid investment
(1) readily convertible to cash
(2) insignificant risk of value changes
Cash flows = inflows and outflows of cash and cash equivalents
4. Three Types of Activities, IAS 7.10, 11
Cash flows are reported in 3 types of activities
(1) operating activities
(2) investing activities
(3) financing activities
5. Operating Activities, IAS 7.14
Examples of cash flows from operating activities
(1) receipts from sale of goods
(2) receipts from services provided
(3) receipts from royalties and other revenue
(4) payments to suppliers for goods and services
(5) payments to employees
(6) payments to governments for income taxes
6. Investing Activities, IAS 7.16
Examples of cash flows from investing activities
(1) payments to acquire investments
(2) payments to acquire long-term assets
(3) receipts from sale of investments
(4) receipts from sale of long-term assets
(5) payments and receipts for
(5a) futures contracts, forward contracts, options contracts
(5b) swap contracts, cash advances, loans
7. Financing Activities, IAS 7.17
Examples of cash flows from financing activities
(1) cash proceeds from
(1a) issuing shares and other equity instruments
(1b) issuing debentures, bonds, notes
(1c) loans, other borrowings
(2) Cash payments for
(2a) acquiring the entity's own shares
(2b) repayments of borrowings
8. Reporting cash flows from operating activities
(1) Direct method
(2) Indirect method
Direct method is encouraged, IAS 7.19
9. Reconciliation of net income to net cash flow
[IFRS]
Profit or loss is reconciled with net cash flow from operating activities
under indirect method, IAS 7.18
[U.S. GAAP]
Reconciliation of net income to net cash flow from operating activities is required
under both methods, ASC 230-15-45-29, SFAS 95.29
10. Interest and dividends
[IFRS]
Interest paid, interest received, dividends received, IAS 7.33
--> cash flows from operating activities, for financial institutions
--> either cash flows from operating activities or
cash flows from financing activities, for non-financial institutions
[U.S. GAAP]
Interest paid, interest received, dividends received, IAS 7.33
--> cash flows from operating activities, ASC 230-10-45-16, 17
11. Dividends paid
[IFRS]
--> either cash flows from operating activities or
cash flows from financing activities, for non-financial institutions, IAS 7.34
[U.S. GAAP]
--> cash flows from financing activities, ASC 230-10-45-15
12. Cash flow per share
[IFRS]
IAS 7 does not have specific rules about cash flow per share information
[U.S. GAAP, ASC 230-15-45-3, SFAS 95.33]
Presentation of cash flow per share information in the financial statements is not allowed.
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