会计英语-现金流量表课件

Chapter 7 Statement of Cash flows IAS 7WANG Li

zhangwangli@http://

1. Main definitions:Cash and cash equivalents comprise cash on hand and demand deposits, together with short-term, highly liquid investments that are readily convertible to a known amount of cash, and that are subject to an insignificant risk of changes in value. Guidance notes indicate that an investment normally meets the definition of a cash equivalent when it has a maturity of three months or less from the date of acquisition.2

Equity investments are normally excluded, unless they are in substance a cash equivalent (e.g. preferred shares acquired within three months of their specified redemption date). Bank overdrafts which are repayable on demand and which form an integral part of an enterprise's cash management are also included as a component of cash and cash equivalents.3

11

2. Presentation of the Statement of Cash FlowsCash flows must be analysed between operating, investing and financing activities. Operating activities are the principal revenueproducing activities of the enterprise 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 changesin the size and composition of the equity capital and borrowings of the enterprise.4

11

Examples of cash flows from operating activities are:(a) cash receipts from the sale of goods and the rendering of services; (b) cash receipts from royalties, fees, commissions and other revenue; (c) cash payments to suppliers for goods and services; (d) cash payments to and on behalf of employees;5

11

Examples of cash flows arising from investing activities are:(a) cash payments to acquire property, plant and equipment, intangibles and other long-term assets. These payments include those relating to capitalised development costs and self-constructed property, plant and equipment; (b) cash receipts from sales of property, plant and equipment, intangibles and other long-term assets; (c) cash payments to acquire equity or debt instruments of other enterprises and interests in joint ventures; (d) cash receipts from sales of equity or debt instruments of other enterprises and interests in joint ventures; (e) cash advances and loans made to other parties (other than advances and loans made by a financial institution); (f) cash receipts from the repayment of advances and loans made to other parties (other than advances and loans of a financial institution);6

11

Examples of cash flows arising from financing activities are:(a) cash proceeds from issuing shares or other equity instruments; (b) cash payments to owners to acquire or redeem the enterprise's shares; (c) cash proceeds from issuing debentures, loans, notes, bonds, mortgages and other short or longterm borrowings; (d) cash repayments of amounts borrowed; and (e) cash pay

ments by a lessee for the reduction of the outstanding liability relating to a finance lease.7

11

Interest and Dividendsinterest and dividends received and paid may be classified as operating, investing, or financing cash flows, provided that they are classified consistently from period to period

11

Taxes on Incomecash flows arising from taxes on income are normally classified as operating, unless they can be specifically identified with financing or investing activities

11

3. DisclosureInvesting and financing transactions which do not require the use of cash should be excluded from the statement of cash flows, but they should be separately disclosed elsewhere in the financial statements. The components of cash and cash equivalents should be disclosed, and a reconciliation presented to amounts reported in the statement of financial position. The amount of cash and cash equivalents held by the enterprise that is not available for use by the group should be disclosed, together with a commentary by management.

11

4. Methods of preparing statement of cash flowsFor operating cash flows, the direct method of presentation is encouraged, but the indirect method is acceptable

direct methodThe direct method shows each major class of gross cash receipts and gross cash payments. The operating cash flows section of the statement of cash flows under the direct method would appear something like this: Cash receipts from customers xx,xxx Cash paid to suppliers xx,xxx Cash paid to employees xx,xxx Cash paid for other operating expenses xx,xxx Interest paid xx,xxx Income taxes paid xx,xxx Net cash from operating activities xx,xxx

indirect methodThe indirect method, whereby net profit or loss is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments, and items of income or expense associated with investing or financing cash flows.

The operating cash flows section of the statement of cash flows under the indirect method would appear something like this: Profit before interest and income taxes xx,xxx Add back depreciation xx,xxx Add back amortisation of goodwill xx,xxx Decrease in receivables xx,xxx Decrease in inventories xx,xxx Increase in trade payables xx,xxx Interest paid xx,xxx Income taxes paid xx,xxx Net cash from operating activities xx,xxx

11

The advantages of statement of cash flowsshow the ability to generate cash cash is more comprehensive than profit creditors are satisfied a better means of comparing results satisfies the needs of all users better easier to prepare can be audited easier easier to be understood provide more information forecasts can be compared with actual cash flows15