This document contains comprehensive examples and steps on how to do consolidated statement of cash flows with clear information and guidance of what amounts come from where. I also show you how to calculate the cash effect of changes in ownership (such as associate to subsidiary changes etc)
IAS 7- Statement of cash flows
1) Cash flows from Operating activities
2) Cash flows from Investing activities
3) Cash flows from Financing activities
4) Net change in cash and cash equivalents
a. This increase or decrease must agree to the 3
categories added together
5) NOTES to the statement of cash flows
• The purpose:
o is to show us how our cash moved during the course of the financial year
• If one leg of the journal entry is DR/CR Bank this goes in the statement of cash flow
• The statement shows us how the company:
o Ability to generate cash (inflow) and
o Needs to utilize that cash (outflow)
• All companies must comply with IAS 7
• We only disclose the current year:
o (we don’t need to do comparatives)
• Benefits of cash flow information (.4-.5) of IAS 7
• A credit card (bank overdraft) will be considered part of cash and cash equivalent
• Par .9 (movements in cash & cash equivalents)
o EG invest excess cash in short term investment (IE cash equivalents), transfer money from savings to
current account (this is just moving cash from one category to another NOT money in or out)
• Par .12 ( a single transaction including more than one cash flow)
o For example the repayment of loans
DR loan (financing)
DR interest paid (operating)
CR Bank
,OVERALL SUMMARY OF ITEMS ON THE FACE OF THE CONSOLIDATED STATEMENT :
Operating activities Investing activities
➔ Cash receipts from clients ➔ Replacement of PPE
➔ Cash paid to employees & suppliers ➔ Additions to PPE / Land
➔ Tax paid ➔ Proceeds with sale of PPE
➔ Interest paid ➔ Proceeds with sale of land
➔ Dividends paid ➔ Purchase of interest in associate
➔ Interest received ➔ Proceeds on sale of subsidiary
➔ Dividends received ➔ Proceeds on sale of associate
➔ Proceeds on sale of investment
Financing activities
➔ Loans repaid
➔ Loans incurred
➔ Purchase of additional interest in subsidiary
➔ Proceeds with sale of partial interest in subsidiary
➔ Proceeds from rights issue to NCI
➔ Proceeds on shares issue (by parent)
,Operating activities (p/l)
➢ Day to day trading
➢ Normal course of business
➢ If is your main business to deal with loans then its part of operating activities
▪ Eg SA home loans principal business is to deal in loans
➢ Interest
➢ Tax
➢ Dividends
Investing activities ( SFP Asset)
➢ An asset that will generate future income
➢ For disposals
o We want the actual cash we received
o So if we disposed of a vehicle and received another vehicle this is NOT part of statement of cash flow
➢ Passive investment, associate and maybe subsidiary
➢ Changing status = investing
o Change in status :
▪ Eg :
• 0% -> associate
• Associate -> 0
Financing activities (equity & loans payable)
➢ We need more money to acquire further resources to generate income
➢ “partial interest” (where there is no status change)
o E.g 80%-> 60%
o 55%-> 70%
o NO change in status:
▪ EG:
• Rights issue
• Sub-> sub
NOTES TO THE STATEMENT OF CASH FLOW:
1) There will be a NOTE ( we only do a note if we lose/ acquire control)
a. Sub- 0
b. Sub- associate
c. Associate – sub
d. 0 – sub
Direct Method Indirect method
- Major classes of gross cash receipts & gross cash - Only need to take note there wont be a big
payments question
- The adjustments are done as part of s calculation
and not on the face
Non- cash items - We show the detail on the face of statement
- Working capital
- Depreciation
, BASIC STATEMENT: NOT CONSOLIDATED
STATEMENT OF CASH FLOWS OF ZZZ LIMITED FOR THE YEAR ENDED 30 JUNE 2021
(NOT CONSOLIDATED)
Calc. / Note
Net cash …flow from operating activities Xx / (x)
Cash receipts from clients 2+3
Cash payments to suppliers and employees 4+5 ()
Net cash generated by operations
Interest received
Dividends received
Interest paid ()
Dividends paid 6 ()
Taxation paid 7 ()
Net cash …flow from investing activities
Replacement of plant and equipment ()
Additions to plant and equipment/ expansion ()
Purchase of patents
Purchase of investments ()
Proceeds on sale of investments
Additions to fixed property ()
Proceeds on sale of plant and equipment (NOT profit)
Net cash …flow from financing activities
Proceeds from shares issued (share capital increases)
Proceeds from long term loans incurred (cash receipts)
Redemption of redeemable preference shares (share cap goes down) ()
Long term loans repaid ()
Net …crease in cash and cash equivalents
Cash and cash equivalents beginning of period (from SFP)
Cash and cash equivalents end of period (from SFP) 1
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