Fair value Other disclosures

Chapter 21 - Statement of Cash Flows Page 306 Operating cash flow Investing cash flow Financing cash flow Cash and cash equivalents Cash received from customers Cash payments to purchase a non- current asset Issue of shares for cash Short-term cash deposit Cash received as commission Cash repayment of a loan Cash repayment of an overdraft Cash payment to purchase listed government securities Note: the following items are non-cash transactions and would not appear in the statement of cash flows: – revaluation of land; and – a bonus issue of shares. Chapter 21 – Statement of Cash Flows Page 307 4 Overview of IAS 7 – A Statement of Cash Flows An illustrative pro forma statement of cash flows is set out below: Statement of cash flows for the year ended 30 June 2008 CU000 CU000 Cash flows from operating activities Cash generated from operations 10,000 Interest paid 3,000 Tax paid 5,000 Net cash from operating activities 2,000 Cash flows from investing activities Purchase of property, plant and equipment 1,200 Proceeds from sales of property, plant and equipment 100 Interest received 200 Dividends received 300 Net cash used in investing activities 600 Cash flows from financing activities Issue of ordinary shares 2,000 Issue of preference shares 1,100 Issue of non-current interest-bearing borrowings 2,500 Redemption of non-current interest-bearing borrowings 1,000 Dividends paid 500 Net cash used in financing activities 4,100 Net change in cash and cash equivalents 5,500 Cash and cash equivalents brought forward 3,200 Cash and cash equivalents carried forward 8,700 This illustrative example of a statement of cash flows shows interest paid as part of operating activities because it is part of the profit or loss reported by the entity in the period. However, IAS 7 also permits interest paid to be reported as part of the entity’s financing or investing activities. [IAS 7.31] Interest received and dividends received are shown as part of the investing activities in the illustration set out above; however, they may be reported as part of the operating or financing activities as described above for interest paid. [IAS 7.31] Dividends paid are shown as part of the financing operations of the entity in the illustration because they relate to the cost of obtaining equity finance. An alternative treatment permitted under IAS 7 is to include them as part of the operating activities of the entity. Although dividends paid are not deducted in arriving at the profit or loss for the period in the statement of comprehensive income, this presentation allows a user to assess the entity’s future ability to pay dividends out of its operating activities. The separate line items set out under the required cash flow headings should represent the major classes of gross cash receipts and payments arising for each of the activities. [IAS 7.21] Certain cash flows may be reported on a net basis under the relevant cash flow heading. Items shown net may include, for example, cash that is received by the entity on behalf of a third party and is subsequently paid on to that third party. Cash flows should also be