IAS 7 - STATEMENT OF CASHFLOWS Flashcards
What is the objective of IAS 7?
to require the presentation of information about the historical changes in cash and cash equivalents of an entity by means of a statement of cash flows, which classifies cash flows during the period according to operating, investing, and financing activities
All entities that prepare financial statements in conformity with IFRSs are required to present a statement of cash flows
True or False?
True
The statement of cash flows analyzes changes in what during a period?
cash and cash equivalents
Comprises cash on hand and demand deposits, together with short-term, highly liquid investments that are readily convertible to a known amount of cash, and that are subject to an insignificant risk of changes in value
Cash and cash equivalents
Guidance notes indicate that an investment normally meets the definition of a cash equivalent when it has a maturity of how many months?
Three months or less from the date of acquisition.
This investments re normally excluded, unless they are in substance a cash equivalent (e.g. preferred shares acquired within three months of their specified redemption date).
Equity investments
Those that are repayable on demand and which form an integral part of an entity’s cash management are also included as a component of cash and cash equivalents.
Bank overdrafts
Cash flows must be analyzed between what following three activities?
operating, investing and financing activities
Are the main revenue-producing activities of the entity that are not investing or financing activities, and includes cash flows such as cash received from customers and cash paid to suppliers and employees.
Operating activities
Are the acquisition and disposal of long-term assets and other investments that are not considered to be cash equivalents.
Investing activities
Are activities that alter the equity capital and borrowing structure of the entity.
Financing activities
These accounts may be classified as operating, investing, or financing cash flows, provided that they are classified consistently from period to period.
Interest and dividends received and paid
These are normally classified as operating, unless they can be specifically identified with financing or investing activities.
Cash flows arising from taxes on income
For this type of cash flow activity, the direct method of presentation is encouraged, but the indirect method is acceptable.
Operating cash flows
This method shows each major class of gross cash receipts and gross cash payments. This is also called an user-friendly method and would appear something like this:
Cash receipts from customers
Cash paid to suppliers
Cash paid to employees
Cash paid for other operating expenses
Interest paid
Income taxes paid
= Net cash from operating activities
Direct method