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Cash Cash Equivalents: Philippine Accounting Standards 7 Statement of Cash Flows

The document outlines the Philippine Accounting Standards for the Statement of Cash Flows. It discusses the purpose of the statement, defines cash and cash equivalents, and classifies cash flows into three categories: operating, investing, and financing activities. It also addresses the direct and indirect methods for presenting cash flows, treatment of foreign currency transactions, and disclosure requirements.

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Trisha Ala
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238 views

Cash Cash Equivalents: Philippine Accounting Standards 7 Statement of Cash Flows

The document outlines the Philippine Accounting Standards for the Statement of Cash Flows. It discusses the purpose of the statement, defines cash and cash equivalents, and classifies cash flows into three categories: operating, investing, and financing activities. It also addresses the direct and indirect methods for presenting cash flows, treatment of foreign currency transactions, and disclosure requirements.

Uploaded by

Trisha Ala
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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PHILIPPINE ACCOUNTING STANDARDS 7

STATEMENT OF CASH FLOWS


I. Statement of Cash Flows – provides information about the sources and utilization of
cash and cash equivalents during the period.
II. Cash and Cash Equivalents
a. Cash – comprises cash on hand and cash in bank.
b. Cash Equivalents – are short-term, highly liquid investments that are readily
convertible to known amounts of cash and which are subject to an insignificant
risk of changes in value. Qualifies as a cash equivalent only when it has a short
term maturity of three months or less from the date of acquisition.
III. Classification of Cash Flows
a. Operating activities – primarily derived from the principal revenue-producing
activities of the entity.
b. Investing activities – involve in the acquisition and disposal of noncurrent assets
and other investments.
c. Financing activities – affect the entity’s equity capital and borrowing structure.
IV. Cash flows Excluded from the Activities Sections
Cash flows on movements between “cash” and “cash equivalents” are not
presented separately because these are part of the entity’s cash management.
Bank overdrafts that cannot be offset to cash are presented as financing
activities and those that can be offset to cash forms part of the balance of cash
and cash equivalents and therefore not presented separately in the activities
sections.
Cash flows denominated in foreign currency are translated using the spot
exchange rate at the date of the cash flow.
V. General Concept in the Preparation of Statement of Cash Flows
Statement of cash flows is prepared using cash basis.
Only transactions that affected cash and cash equivalents are reported in the
statement of cash flows.
Non-cash transactions are excluded and disclosed only.
VI. Interest and Dividends
A. Option 1
Interest income, interest expense and dividend income are classified as
operating activities because they enter into the determination of profit or
loss.
Dividend paid is classifies as financing activity because it is a transaction
with the owners and alters the equity structure.
B. Option 2
Interest income and dividend income are classified as investing activities
because they result from investments.
Interest expense is classifies as financing activity because it results from
borrowing.
Dividend paid is classifies as operating activity in order to assist users in
assessing the entity’s ability to pay dividends out of operating cash flows.
VII. Presentation
a. Direct Method – shows each major class of gross cash receipts and gross cash
payments.
b. Indirect Method – profit or loss is adjusted for the effects of non-cash items and
changes in operating assets and liabilities.
VIII. Changes in Ownership Interest in Subsidiaries
a. Acquisitions and disposals of subsidiaries resulting to loss or obtaining of control
are classifies as investing activities.
b. Classifies as financing activities those that do not result to loss or obtaining of
control.
IX. Disclosure
a. Components of cash and cash equivalents and a reconciliation of amounts in the
statement of cash flows with the equivalent items in the statement of financial
position.
PHILIPPINE ACCOUNTING STANDARDS 7
STATEMENT OF CASH FLOWS
b. Significant cash and cash equivalents held by the entity that are not available for
use by the group, together with a management commentary.

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