In this article we take a look at the benefits and limitations of Cash Flow Statements.
Cash flow statements – benefits
Cash flow information provided in the statement of cash flows can be beneficial, for example:
IFRS
Statement of Cash Flows: Financing Activities (IAS 7)
The third section of a statement of cash flows is for financing activities.
Statement of Cash Flows: Investing Activities for IAS 7
Investing Activities
In this article, we’re looking at the second section of a statement of cash flows which is for investing activities.
Statement of Cash Flows: Introduction to Operating Activities for IAS 7
Operating activities are those activities linked to provision of goods or services by the entity, so the normal trading activities of the entity.
Statement of Cash Flows: Operating Activities – Indirect method for IAS 7
In this article, we look at the Indirect Method of preparing a statement of cash flows.
When the indirect method of presenting the statement of cash flows is used, the net profit or loss for the period is adjusted for the following items:
Statement of Cash Flows: Operating Activities – Direct method for IAS 7
Operating Activities – Direct method
When the direct method of presenting the statement of cash flows is used, the major classes or receipts and payments are listed out, and the final balance of these gives us the net cash flows from operating activities.
Step Acquisitions under IFRS 3
Not all business combinations take place in one go. Sometimes a parent can acquire an entity in stages, which we call a step acquisition. This takes place when an acquirer holds an existing equity interest in the acquiree before the date of control. Say, for example, a company may hold 25% of a company, and then buy out another shareholder taking their share to 55% of the acquiree.
How to translate the financial statements of a foreign subsidiary under IAS 21
Statement of Financial Position At the end of the financial year, the SOFP of the overseas subsidiary will be translated using the closing rate (i.e. the exchange rate at the date of the balance sheet) For opening net assets, these were translated in last year’s financial statements at last year’s closing rate and must be retranslated for …
Foreign Exchange transactions at an individual company level under IAS 21
When a company enters into transactions in a currency that’s different to its functional currency (i.e. a foreign exchange transaction), the results of these transactions should be translated and recorded in the company’s accounting records in its functional currency. The company can use either: the spot exchange rate on the date the transaction occurred, or Using an …
Disposal of a foreign subsidiary under IAS 21
When a subsidiary is disposed of, and the results were translated using the closing rate method, the cumulative exchange difference which has been taken to reserves (because they were unrealised) becomes realised. Under IAS 21, this foreign exchange reserve may be transferred to the income statement on the disposal of the subsidiary as part of the gain …