C

Consolidated
lid t d Statement
St t t off Cash
C h Flow
Fl

• The preparation of a consolidated cash flow statement

generally follows the same procedures as applied to the
cash flow statement of a stand-alone entity. (Refer to
prior financial accounting
p g courses in Year 1 and Year 2).
)

• Basic information for the p

preparation
p of a consolidated
statement of cash flow:-
1. Consolidated income statement;
2. Consolidated balance sheets (for two consecutive
years); and
3. Consolidated notes to the accounts

C
Consolidated
lid t d Statement
St t t off Cash
C h Flow
Fl

•Some key features in preparing consolidated statement of cash flow:-

•1.
1 Depreciation
D i ti and
d amortization
ti ti off a purchase
h differential
diff ti l (diff
(difference
between fair value and book value) together with the depreciation and
amortization expenses of the individual companies in the group are
added back to consolidated net profit as they do not involve any cash
inflow or outflow.
•2.
2 All ttransfers
f b
between
t group companies
i and
d any unrealized
li d profits
fit
resulting from these transfers would have been eliminated in the
preparation of the consolidated income statement and consolidated
balance sheets and thus no further adjustments are needed.
2
 C
Consolidated
lid t d Statement
St t t off Cash
C h Flow
Fl

•3. Non-controlling interests’ share of net profit is a non-

cash adjustment that is added back to consolidated net
income to arrive at net cash flows from operating activities.
activities

•4. Payments to non-controlling shareholders (e.g

dividends) and receipts from non-controlling shareholders
(e.g. subscription of additional shares) are disclosed as
uses or sources of cash under financing activities.

Consolidated Statement of Cash Flow

•Note also that where there is an acquisition
q or sale of subsidiaries made
during the year, we need the following disclosures:-
•1.
1 The
Th total
t t l purchase
h or sale
l consideration;
id ti

•2. The portion of the purchase/sale consideration paid for in cash;

•3. The amount of cash and cash equivalents in the subsidiary

acquired/sold;
i d/ ld andd

•4. The amount of the assets and liabilities other than cash or cash
q
equivalent in the subsidiaryy acquired/sold
q summarized byy each major
j
category. 4
C
Consolidated
lid t d St
Statement
t t off C
Cash
h Fl
Flow

• Self-study TLK illustration 7.9 on preparation of Consolidated

Statement of Cash Flow.
• TLK Appendix 7D contains the Consolidated Statement of Cash
Flow for a local parent and foreign subsidiary.
• Consolidated cash flow statements involving a foreign subsidiary
would require the application of special consideration:
o Cash flow from operations,
operations investing and financing activities of a
foreign subsidiary should be translated at the actual rates on the
dates of the cash flows.
o It would be incorrect to translate the working capital balances at
the closing rate at the respective year ends.
• We will discuss foreign currency translations of foreign operations
(e.g. foreign subsidiaries) in subsequent weeks (see TLK Chapter 8)
before revisiting Appendix 7D7D.
5