IAS 7, or International Accounting Standard 7, is a financial reporting standard issued by the International

Accounting Standards Board (IASB). It is titled “Statement of Cash Flows” and provides guidelines for the
presentation and preparation of the statement of cash flows in an organization’s financial statements.

The statement of cash flows is a key component of financial reporting as it helps users of financial
statements assess the organization’s ability to generate cash and cash equivalents, its liquidity position,
and its operating, investing, and financing activities.

IAS 7 requires organizations to present their cash flows from operating activities, investing activities, and
financing activities separately in the statement of cash flows. It provides guidance on the classification of
cash flows into these categories and requires the use of the indirect method for presenting cash flows
from operating activities, where the net profit or loss is adjusted for non-cash items and changes in
working capital.

The standard also provides guidance on the presentation of cash equivalents, which are short-term,
highly liquid investments that are readily convertible into cash, as well as the disclosure requirements for
significant non-cash transactions and the reconciliation of net profit or loss to cash flows from operating
activities.

IAS 7 aims to enhance the usefulness and comparability of the information provided in the statement of
cash flows by ensuring consistent reporting practices across organizations. It promotes transparency and
allows users of financial statements to make informed decisions based on the organization’s cash flow
information.

Adherence to IAS 7 is required for organizations that adopt International Financial Reporting Standards
(IFRS) for their financial reporting. It is important for preparers, auditors, and users of financial
statements to understand and apply the requirements of IAS 7 accurately to ensure compliance with the
standard and to provide reliable and relevant cash flow information to stakeholders.