FinanceFinancial AccountingIASIFRS

IAS – 07 Statement of Cash Flows

By December 10, 2018 No Comments

Objectives:

The objective of cash flow is to require the presentation of information about cash and cash equivalent of the entity.

Cash and cash equivalent: Cash and cash equivalent are;

  • Short term (where the original maturity is 3 months or less, irrespective of maturity timing post balance date)
  • Highly liquid investments
  • Readily convertible to known amounts of cash
  • Subject to insignificant risk of changes in value

Components: The cash flow statement has three main components;

  1. Operating activities:

Revenue producing activities of the entity is operating activities.

  1. Investing activities:

Activities that related to acquisition and disposal of long term assets and other activities that is not included in cash and cash equivalent.

  • Financing activities:

Activities that cause changes to contributed equity and borrowings of the entity.

Methods:

Cash flow from operating activities can be calculated from both methods;

  1. Direct Method:

Whereby major classes of gross cash receipts and gross cash payments are disclosed

  1. Indirect Method:

Where profit or loss is adjusted with

  • working capital changed
  • non-cash items and
  • items associated with investing or financing activities

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IAS – 07 Statement of Cash Flows

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