Class # 11

Consolidated statement of Cash flows

with practice
Rafiqul Islam FCMA
Basic format
In accordance with IAS 7, statement of cash flows are classified under
the following headings:
• Cash flows from operating activities
• Cash flows from investing activities
• Cash flows from financing activities
Methods of cash flows statement
• Direct method
• Indirect method
Group statement of cash flows
Basic Principle: is to show the cash flows of the group with third
parties.
Additional issues:
Cash flows to non-controlling interest
Cash received from associates and joint ventures
Acquisitions/disposals of subsidiaries
Acquisitions of associates and joint ventures
Cash flows to non-controlling interest
Dividends paid to the NCI should be reflected as a cash outflow under
the heading of “cash flows from financing activities”
Associates and joint ventures
• Any cash flows between associates or joint venture and third parties
are irrelevant.
• Group share of profit of the associates or joint venture must be
deducted as an adjustment in the reconciliation of profit before tax to
cash generated from operations
• Dividends received from an associate or joint venture must be
disclosed as a separate cash flow classified as “Cash flows from
investing activities”
Acquisitions/disposals of subsidiaries
• If a subsidiary is acquired or disposed of during the accounting period
the net cash effect of the purchase or sale transaction should be
shown separately under as “Cash flows from investing activities”
• Care must be taken not to double count the effects of
acquisition/disposal when looking at the movements in individual
assets balances
• Subsidiary acquired in the period: subtract PPE, inventories, payables,
receivables etc at the date of acquisition from the movement on
these items