STATEMENT OF CASH

FLOW
Presenters

Md. Masudur Rahaman

Md. Saidur Rahman
Md. Rashedul Islam
Md. Ahmed Farhad
STATEMENT OF CASH FLOW

The statement of cash flows shows the ability of any

company to generate cash.

The statement of cash flows is THE ONLY

statement ignoring an accrual basis and based on a
CASH basis.

All other financial statements follow an accrual

principle and it means that we have lots of non-cash
transactions in our financial statements that we
need to eliminate for cash flows.
 Objective of IAS 7

The objective of IAS 7 Statement of cash flows is to

require the information about the historical changes
in cash and cash equivalents of an entity.

This information shall be provided in the statement of

cash flows which classifies cash flows during the period
from operating, investing and financing activities.
Cash and Cash Equivalents
Presentation of
The statement of cash flows

Changes of :
Changes of : Changes of :
Short term Assets
Long term Assets Long term Liabilities
Short term Liabilities

Operating activities are the principal revenue-producing activities of the entity and
other activities that are not investing or financing activities.
Investing activities are the acquisition and disposal of long-term assets and other
investments not included in cash equivalents.
Financing activities are activities that result in changes in the size and composition of
the contributed equity and borrowings of the entity.
Examples of
different activities of cash flows
Statement of Cash Flow
Operating Activities
Cash receipts from :
the sale of goods and the
rendering of services
royalties, fees, commissions
and other revenue
Cash payments to:
suppliers for goods and
services
To employees
Cash receipts and cash
payments :
an insurance entity for
premiums and claims, annuities
and other policy benefits
 Income taxes
from contracts held for dealing
or trading purposes
Investing Activities
Cash receipts from :
sales of PPE, intangibles and
other long-term assets
sales of equity or debt
instruments of other entities
and interests in joint ventures
Cash advances and loans
Cash payments to:
acquire property, plant and
equipment, intangibles and
other long-term assets
acquire equity or debt
instruments of other entities
and interests in joint ventures
Cash advances and loans
made to other parties
Financing Activities
Cash receipts from :
issuing shares or other equity
instruments
issuing debentures, loans,
notes, bonds, mortgages and
other short-term or long-term
borrowings
Cash payments to:
owners to acquire or redeem
the entity’s shares
of amounts borrowed
by a lessee for the reduction
of the outstanding liability
relating to a finance lease.
Operating Activities
Methods

In Direct method there need to disclose major classes of gross cash receipts and gross
cash payments;

In Indirect method there need to start with the profit or loss before tax and then
adjust it for the effect of:

Working capital changes over the period (inventories, operating receivables,

payables);
Non-cash items (depreciation, unrealized foreign exchange gains or losses, etc.);
Items associated with investing or financing activities.
Operating Activities
Methods

Indirect Method

Direct Method
Final reconciliation
The statement of cash flows should also contain the
final reconciliation in which you summarize the
overall movement in cash and cash equivalents.
Reporting cash flows
from investing and financing activities
Cash flows from investing and financing activities shall always be reported GROSS, so no netting off.
It means that …..
It cannot be presented the cash paid to acquire some vehicle and cash received from sale of some
other vehicle in 1 line – instead,
It must be presented these cash flows separately in 2 lines.

Except for

Quick Turnover, Large

On Behalf of Customers Amount, Maturity
Short
For example, some real estate company
For example, changes in principal
can collect rents from tenants and pay
amounts relating to credit card customers.
them over to the property owners.
Other issues
Exchange rate at the date of the cash flow
Foreign currency +
Unrealized year-end foreign exchange gains or
losses are NOT cash flows

Shall be presented separately and consistently

Interest and dividends from period to period
+
Consistently in operating/Investing/Financing
Part

Classified as cash flows from operating activities

Taxes on income +
If specifically identify these taxes with financing or
investing activities, then should be reported cash
flows
Investments in subsidiaries, from taxes in these parts.
associates and joint
venture Depends on the accounting method
Other issues
Futures, Forward Contracts, Options & Swaps
Normally classified as Investing Activities……

Except for

Contracts held for Payments & receipts as

trading & dealing considered as Financing
purposes-Operating Act. activities
Changes in ownership interests in
subsidiaries and other businesses
 The aggregate cash flows arising from obtaining or losing control of subsidiaries or
other businesses shall be presented separately and classified as investing activities.

 An entity shall disclose, in aggregate, in respect of both obtaining and losing control
of subsidiaries or other businesses during the period each of the following:

(a) the total consideration paid or received;

(b) the portion of the consideration consisting of cash and cash equivalents;

(c) the amount of cash and cash equivalents in the subsidiaries or other
businesses over which control is obtained or lost; and

(d) the amount of the assets and liabilities other than cash or cash
equivalents in the subsidiaries or other businesses over which control is
obtained or lost, summarized by each major category.
Non-cash transactions
Investing and financing transactions that do not require the use of
cash or cash equivalents shall be excluded from a statement of cash
flow.

Such transactions shall be disclosed elsewhere in the financial

statements in a way that provides all the relevant information about
these investing and financing activities.

Examples of non-cash transactions are:

 the acquisition of assets either by assuming directly related

liabilities or by means of a finance lease;
 the acquisition of an entity by means of an equity issue; and
 the conversion of debt to equity.
Examples of Statement of Cash Flow