Question

Question: Briefly analyse the topic IAS 7as used in general purpose Financial reporting

Answer 1

IAS 7 Statement of Cash Flows requires an entity to present a statement of cash flows of its primary financial statements.

Cash flows are classified and presented into operating activities (either using the 'direct' or 'indirect' method), investing activities or financing activities.

Presentation of the Statement of Cash Flows:-

• Operating activities:- Operating cash flows include cash received from customers and cash paid to suppliers and employees. It is the revenue-producing activities that are not investing or financing activities.
• investing activities:- Acquisition and disposal of long-term assets and other investments that are not considered to be cash equivalents.
• Financing activities:- Activities that alter the equity capital and borrowing structure of the entity.

Operating cash flows under direct method performa:-

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

Operating cash flows under indirect method performa:-

Profit before interest and income taxes		xx,xxx
Add back depreciation		xx,xxx
Add back impairment of assets		xx,xxx
Increase in receivables	xx,xxx
Decrease in inventories		xx,xxx
Increase in trade payables		xx,xxx
Interest expense	xx,xxx
Less Interest accrued but not yet paid	xx,xxx
Interest paid		xx,xxx
Income taxes paid		xx,xxx
Net cash from operating activities		xx,xxx

• Interest and dividends received and paid may be classified as operating, investing, or financing cash flows.
• cash flows arising from taxes on income are classified as operating.