IAS 7

STATEMENT OF CASH FLOWS

OBJECTIVE

 The objective of IAS 7 is to provide the information

about the historical changes in cash and cash
equivalents of an enterprises by means of a statement of
cash flows, which classifies cash flows during the period
according to Operating, Investing and Financing
activities.
PRESENTATION
A statement of cash flows is a list of cash in and cash out
reconciling opening and closing cash balances.

Classification
Operating activities Investing activities

Financing activities
 CASH FLOW FROM OPERATING ACTIVITIES
 Operating activities are the main revenue –producing
activities of the enterprises that are not investing or
financial activities.

Cash flows can be presented by either:

Direct method or Indirect method

 Key indicator of sufficiency of cash flows without recourse to external

sources of finance.
 Useful in forecasting future operating cash flows.
 Primarily derived from principal revenue-producing activities.
 Generally results from transaction and events so included in profit
and loss.
CASH FLOWS FROM INVESTING
ACTIVITIES
Investing activities are the acquisition and disposal of
long term assets and other investments that are not
considered to be cash & cash equivalents.

Separate disclosure-cash flows represent extent to which

expenditures have been made for resources intended to
generate future income and cash flows
CASH FLOWS FROM FINANCING
ACTIVITIES
Financing Activities are the activities that alter the equity
capital and borrowing structure of the enterprise.

Separate disclosures-Useful in predicting claims on future

cash flows by providers of capital.