Presentation on the adoption

of the
International Public Sector
Accounting Standards (IPSAS)
into the
Philippine Public Sector
Accounting Standards
(PPSAS)

Public Sector Accounting Standards Board (PSAcSB)

Venue: COA Professional Development Office
PPSAS 2 —Cash Flows
Statement
 Session Overview

This session covers the preparation,

presentation, and reporting of cash flow
statements (CFS) and related disclosures in
accordance with the requirements of PPSAS 2.
 Learning Objective

At the end of this session, the participants will be

able to:
•understand the IPSAS that are applicable in
the preparation, presentation and reporting of
CFS
•know the salient provisions of IPSAS
•know the components, format of the CFS and
how they are prepared
 PPSAS 2 — Cash Flows Statement

OUTLINE

• BACKGROUND
• OBJECTIVE
• SCOPE
• DEFINITIONS
• IPSAS SALIENT PROVISIONS
• ILLUSTRATIVE FORMAT OF CFS
 BACKGROUND

 IPSAS 2 - “Cash Flow Statements ”,

and

 Philippine Application Guidance

(PAG)

IPSAS 2 —
Cash Flows Statements
 OBJECTIVE of PPSAS 2

To set overall considerations for the:

• presentation of a cash flow statement

• reporting of cash flows

• disclosure

IPSAS 2 —
Cash Flows Statements
 SCOPE

• NGAs

• LGUs

• GOCCs not GBEs

IPSAS 2 —
Cash Flows Statements
 Definitions

• Cash equivalents are short-term,

highly liquid investments that are
readily convertible to known amounts
of cash and which are subject to an
insignificant risk of changes in value.

IPSAS 2 —
Cash Flows Statements
 Cash Cash
Equivalents Currency

 Short-term, highly liquid investments.

 Readily convertible into cash.
 So near maturity that market value is unaffected by
interest rate changes.
 Cash and Cash Equivalents

Par 9
Cash flows exclude movements between
items that constitute cash or cash
equivalents,

IPSAS 2 —
Cash Flows Statements
 Definitions

Operating activities are the cash flows derived primarily from the principal cash-
generating activities of the entity.

IPSAS 2 —
Cash Flows Statements
 Definitions

Investing activities are the cash flows derived from acquisition and disposal of
long-term assets and other investments not included in cash equivalents.

IPSAS 2 —
Cash Flows Statements
 Definitions

Financing activities are the cash flows derived from the equity capital and borrowings of the entity.

IPSAS 2 —
Cash Flows Statements
 Purpose of the Statement of Cash Flows

• Provides information about the cash

receipts and cash payments of an
entity during the accounting period.

IPSAS 2 —
Cash Flows Statements
 SALIENT PROVISIONS

IPSAS 2 —
Cash Flows Statements
 Presentation of Cash Flow Statement

• The cash flow statement shall report

cash flows during the period classified
as operating, investing and
financing activities.
• Direct method

IPSAS 2 —
Cash Flows Statements
 Operating Activities

Examples of Cash Flows from operating activities:

a) Cash receipts from taxes, levies and fines;
b) Cash receipts from charges for goods and
services provided by the entity.
c) Cash receipts from grants or transfers and
other appropriations or other budget
authority made by central government or
other public sector entities; and
d) Cash receipts from royalties,
fees, commissions and other revenue;

IPSAS 2 —
Cash Flows Statements
 Operating Activities

Examples of Cash Flows from operating activities:

e) Cash payments to other public sector entities to finance their operations (not including loan)
f) Cash payments to suppliers for goods and services;
g) Cash payments to and on behalf of employees;
h) Cash receipts and cash payments of an insurance entity for premiums and claims, annuities,
and other policy benefits;

IPSAS 2 —
Cash Flows Statements
 Operating Activities
Examples of CF from operating activities, Cont’d:
i)Cash payments of local property taxes or income taxes (where
appropriate) in relation to operating activities;
j)Cash receipts and payments from contract held for dealing or
trading purposes;
k) Cash receipts or payments from discontinuing operations; and
l) Cash receipts or payments in relation to litigation settlements.

IPSAS 2 —
Cash Flows Statements
 Investing Activities

Examples of cash flows from investing activities:

a) Cash payments to acquire property, plant and
equipment, intangibles, and other long-term assets;
b) Cash receipts from sales of property, plant, and
equipment, intangibles and other long-term assets;
c) Cash payments to acquire equity of debt instruments
of other entities and interests in joint ventures;

IPSAS 2 —
Cash Flows Statements
 Investing Activities
Examples of CF from investing activities, Cont’d:
d) Cash receipts from sales of equity or debt instruments of other
entities and interests in joint venture;
e) Cash advances and loans to other parties;

f) Cash receipts from repayment of advances and loans made to other

parties;

IPSAS 2 —
Cash Flows Statements
 Investing Activities

Examples of CF from investing activities, Cont’d:

g) Cash payments for future contract, forward contract, option
contract and swap contract; and

h) Cash receipts from future contract, forward contract, option

contract and

IPSAS 2 —
Cash Flows Statements
 Financing Activities

Examples of cash flows from financing activities:

a) Cash proceeds from issuing debentures, loans,
notes, bonds, mortgages, and other short or long-term
borrowings;
b) Cash repayments of amounts borrowed; and
c) Cash payments by a lessee for the reduction of the
outstanding liability relating to a finance lease.

IPSAS 2 —
Cash Flows Statements
 Reporting Cash Flows from Operating Activities

Par 27
•allows an entity to use either the direct method
or indirect method in reporting cash flows from
operating activities
Par 28
Encourages entities to the adopt the direct
method

IPSAS 2 —
Cash Flows Statements
 Reporting Cash Flows from Operating Activities

• Provide a reconciliation of the

surplus/deficit from ordinary activities with
the net cash flow from operating activities.

IPSAS 1 —
Presentation of Financial Statements
 Foreign Currency Cash Flows

The exchange rate used for translation of cash

flows arising from transactions denominated in a
foreign currency shall be the rate in effect at the
date of the cash flows.

IPSAS 2 —
Cash Flows Statements
 Interest and Dividends

• Cash flows from interest and dividends

received and paid shall be classified as either
operating, investing or financing activity and
shall be made on a consistent basis from
period to period

IPSAS 2 —
Cash Flows Statements
 DISCLOSURES

Components of cash and cash equivalents:

•policy that it adopts in determining the

composition of cash and equivalents

•components of cash and cash equivalents & a

reconciliation of the amounts in its cash flow
statement with the equivalent items reported in
the statement of financial position

IPSAS 2 —
Cash Flows Statements
Sample Reconciliation

IPSAS 1 —
Presentation of Financial Statements
 DISCLOSURES
Noncash transactions

The following noncash transactions are disclosed

separately:
a.Acquisition of assets through the exchange of
assets, the assumption of directly related
liabilities, or by means of finance lease

b. The conversion of debt to equity.

IPSAS 2 —
Cash Flows Statements
 OTHER DISCLOSURES

• An entity shall disclose, together with a

commentary by management in the notes to
the FS, the amount of significant cash and
cash equivalent balances held by the entity
that are not available for use by the economic
entity

IPSAS 2 —
Cash Flows Statements
 OTHER DISCLOSURES

• The amount of undrawn borrowings facilities that

may be available for future operating activities
and to settle capital commitments indicating any
restrictions on the use of these facilities;
• The aggregate amounts of the cash flows from
each of operating, investing, and financing
activities related to interests in joint ventures
reported using proportionate consolidation; and
• The amount and nature of restricted balances
•
IPSAS 2 —
Cash Flows Statements
 Cash Flow Statement

IPSAS 2 —
Cash Flows Statements
 Cash Flow Statement

IPSAS 2 —
Cash Flows Statements
 Cash Flow Statement

IPSAS 2 —
Cash Flows Statements
 Cash Flow Statement

IPSAS 2 —
Cash Flows Statements
 EFFECTIVITY

An entity shall apply this PPSAS for

annual financial statements covering
periods beginning January 1, 2014

IPSAS 2 —
Cash Flows Statements