International accounting standards 12

Question 1

The financial statements:

Answer 1

• Statement of Cash Flows
• Balance sheet (Statement of Financial Position)
• Income statement (Profit and loss statement P&L)
• Statement of Changes in Equity
• Additional Information (Notes)

Question 2

Statement of cash flows:

Answer 2

Receipts (inflows)
Payments (outflows)
Required by IFRS
An important statement, as the objective of financial
reporing is, among others, „assessing the amounts, timing, and uncertainty of cash flows

Question 3

Balance sheet:

Answer 3

• Assets
• Liability
  -Equity

Question 4

Income statement

Answer 4

Revenues and gains
Expenses and losses
= Net Income

Question 5

Statement of Cash Flows: content

Answer 5

• Operating Activities - Transactions that enter into the
  determination of net income.
• Investing Activities - Making and collecting loans and acquiring and disposing of investments and non-current assets
• Financing Activities - Transactions involving liability and equity items.

Question 6

Operating activities:

Answer 6

Inflows: When cash receipts (revenue) exceed (przekroczą) cash expenditures (expenses)
Outflows: When cash expenditures (expenses)
exceed cash receipts (revenue)

Question 7

Investing activities:

Answer 7

Inflows:
* Sale of property, plant, and equipment
* Sale of debt or equity securities of other
entities
* Collection of loans to other entities
Outflows:
Purchase of property, plant, and
equipment
* Purchase of debt or equity securities of
other entities
* Making loans to other entitie

Question 8

Financing activities:

Answer 8

Inflows:
- Issuance of equity securities
* Issuance of debt (bonds and notes)
Outflows:
* Payment of dividends*
* Reaquisition of shares
* Redemption of debt

Question 9

Significant non- cash activities:

Answer 9

• Direct issuance of ordinary shares to purchase assets.
• Conversion of bonds into ordinary shares.
• Direct issuance of debt to purchase assets.
• Exchanges of plant assets.

Question 10

Companies report significant financing and investing activities that do not affect cash in either a

Answer 10

• Supplementary schedule (bottom on the statement)
• Separate note to the financial statements.

Question 11

Companies must convert net income from an accrual basis to a cash basis using either of two methods

Answer 11

• Indirect method adjusts net income for items that do not affect cash.
• Direct method shows operating cash receipts and payments.

Question 12

Companies favor the indirect method for two
reasons:

Answer 12

• Easier and less costly to prepare.
• Focuses on differences between net income and net cash flow from operating activities

Question 13

Free cash flow describes …

Answer 13

Free cash flow describes the net cash provided by operating activities after adjustment for capital expenditures and dividends.
Free Cash Flow = Net Cash Provided by Operating Activities – Capital Expenditures – Cash Dividends