IAS 7 Full text Overview
IAS 7 statement of cash flows require the presentation of information about the historical changes in cash and cash equivalents of an entity by means of a statement of cash flows. Cash flows during the period are classified according to operating, investing, and financing activities.
Presentation of the IAS 7 Statement of Cash Flows
- Cash flows must be analyzed between operating, investing and financing activities.
- For operating cash flows, the direct method of presentation is encouraged, but the indirect method is acceptable.
- The following section will make you understand IAS 7 format with ias 7 amendment illustrative examples.
Starts with:
- Cash Flows from Operating activities:
- Profit before tax
- Adjustment for:
- non-cash items
- remove impact of accruals
- relocate some figures to other position.
- Cash Flows from Investing activities:
- purchase of non-current assets
- sale/disposal of non-current assets
- interest received/dividend received on investment.
Cash Flows from Financing activities:
- purchase of share
- cash from shares
- take loan/issue bonds
- payment under finance lease agreement.
- Cash Flows from Operating activities:
- Receipts from customers
- Less Payments to:
- suppliers
- employees
- operating expenses
- taxation
- interest charges.
- Cash Flows from Investing activities:
- Same as indirect method.
- Cash Flows from Financing activities:
- Same as indirect method.
Accruals Based figures
Interest
- Paid shown in Operating.
- Received shown in Investing.
Dividend
- Paid shown in Financing.
- Received shown in Investing.
Taxation
- Includes Tax expense.
- Includes Deferred Tax.
Presentation Methods: Detailed Explanation
Starts with:
Cash Flows from Operating activities:
- Operating Profit after deducting interest but before tax.
- Adjustment for:
- non-cash items
- depreciation/amortization (add back to profit)
- gain on disposal of NCA (deduct)
- Loss in disposal of NCA (add back)
- remove impact of accruals
- Interest expense (add back)
- Interest income (deduct and relocate to Investing activities)
- Movement on working capital item
- Receivables (deduct increase, add decrease)
- Payable (add increase, deduct decrease)
- Inventory (deduct increase, add decrease)
- Interest paid (deduct)
- Taxation (deduct).
Cash Flows from Investing activities:
- Purchase of non-current assets (deduct)
- sale/disposal of non-current assets (add)
- Payment for Investment (deduct)
- Proceed from disposal of Investment (add)
- interest received/dividend received on investment (add).
Cash Flows from Financing activities:
- Purchase of share (deduct)
- cash from shares (add)
- take loan/issue bonds (add)
- payment under finance lease agreement (deduct)
- dividends payments (deduct).
Cash Flows from Operating activities:
- Receipts from customers.
- LESS: Payments to:
- suppliers
- employees
- operating expenses
- taxation
- interest charges.
Cash Flows from Investing activities:
- Same as indirect method.
Cash Flows from Financing activities:
- Same as indirect method.
IAS 7 pdf (IAS 7 download)
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