FinanceFinancial AccountingIASIFRS

IAS – 07 Statement of Cash Flows

By December 10, 2018 No Comments


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.


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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