Statement of Cash Flows (F8M2)

Question 1

Operating cash flows

Answer 1

All CA except cash and cash equivalents

All accruals except interest bearing liabilities

Question 2

Investing inflow

Answer 2

cash receipts/disbursements from non-current assets

Question 3

Financing cash flows

Answer 3

cash receipts/disbursements from company’s OWN debts

• under GAAP, bank overdrafts are excluded from cash and classified as financing cash flows
• IFRS may include bank overdrafts in cash

Question 4

Cash equivalents

Answer 4

short term, liquid investments that are:

• quickly convertible into specified amounts
• near maturity (within 3 months)

Question 5

Direct method

Answer 5

-Only CFO is different/reconciliation (indirect) required for GAAP but not for IFRS

CFO:
Cash received from customers
+ Interest received
+ Dividends received
+ other operating receipts (insurance proceeds)
+ cash received from sales of trading securities
- cash paid to suppliers/employees
-interest paid
-income taxes paid
- cash paid to acquire trading securities
-other (SG&A) cash payments

Question 6

Cash received from customers - Direct CFO

Answer 6

Revenues
\+ Decrease in AR
- Increase in AR
\+ Increase in unearned revenue 
- Decrease in unearned revenue

Question 7

Cash paid to suppliers - Direct CFO

Answer 7

COGS
\+ Increase in AP
- Decrease in AP
\+ Increase in inventory (buying = outflow)
- Decrease in inventory

Question 8

Cash paid to employees - Direct CFO

Answer 8

Salaries and wages expense
+ Decrease in wages payable
- increase in wages payable

Question 9

Other operating cash payments - Direct CFO

Answer 9

Other operating expenses 
- decrease in PPE 
\+ increase in PPE 
\+ decrease in accrued liabilities 
- increase in accrued liabilities

Question 10

Indirect method

Answer 10

• adjustments to net income
• changes in debit balance will have opposite effect
• changes in credit balances will have the same effect
• Gains are subtracted/losses added
• requires supplemental disclosure of interest and incoem taxes paid

Question 11

Investing activities

Answer 11

-change in non-CA. increase = decrease in cash; decrease = increase in cash

includes:
- making loans to other entities
- purchasing/disposing of non-current trading securities, AFS, and HTM of other entities
- acquiring/disposing of PPE
- acquiring another entity under acquisition method

investing outflow = CAPEX

beginning PPE 
- CY dep exp.
- NBV PPE sold 
\+ CAPEX
END NBV PPE

Question 12

Financing activities

Answer 12

-change in own debt (interesting bearing) and own equity

ADD issuance of debt/equity
SUBTRACT repayment of principal*, repurchase of stock, payment of CASH dividends (not declaring/stock dividends)

*payment of interest is an operating activity

END DIV PAY = beginning + CY declared - $$$ paid