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PAS 7 Summary Notes

The document discusses the classification and presentation of transactions in the statement of cash flows according to PAS 07. It describes operating, investing and financing activities, and how they relate to cash inflows and outflows. It states that the direct method is highly encouraged for computing operating cash flows, while the indirect method adjusts net income for non-cash transactions. Cash flows must be reported gross, with exemptions, and non-cash investing/financing activities should be separately disclosed.

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67 views

PAS 7 Summary Notes

The document discusses the classification and presentation of transactions in the statement of cash flows according to PAS 07. It describes operating, investing and financing activities, and how they relate to cash inflows and outflows. It states that the direct method is highly encouraged for computing operating cash flows, while the indirect method adjusts net income for non-cash transactions. Cash flows must be reported gross, with exemptions, and non-cash investing/financing activities should be separately disclosed.

Uploaded by

dara
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Lexine Dara E.

Comia Accy1a

Unit 3: PAS 07

I. Classification of Transactions in the Statement of Cash Flows


A. Operating activities provide the determination of net income or loss from the cash effect
of the entity’s financial transaction.
1. It includes cash receipts from sale of goods and services which is a cash inflow.
2. It includes cash payments for doing operating activities like salaries expense,
insurance, etc. which is a cash outflow.
3. It includes cash payments for purchases of goods and services which is a cash
outflow.
B. Investing activities provide financial information from acquiring and losing control of
subsidiaries.
1. It includes receipts from sale of PPE, collections on notes receivable, and sale of
investments in debt which are cash inflows in the statement.
2. It includes payments from acquiring PPE, making loans, and acquiring equity
securities which are cash outflows in the statement.
C. Financing activities provide financial information from obtaining resources from owners
and creditors.
1. It includes cash receipts from owner’s investments and issuance of notes
payable which are both cash inflows.
2. It includes cash payments in the form of withdrawals and payments to settle
notes payable which are both cash outflows.

II. Presentation of Activities in the Statement of Cash Flows


A. It can be presented using the Direct Method.
1. It is used in solving for the actual cash received and the cash paid.
2. It presents each major class of gross cash receipts and gross cash payments.
3. It is highly encouraged to use this method in computing for the operating cash
flows.
B. It can be presented using the Indirect Method.
1. It adjusts the net profit or loss for the effects of non-cash transactions.

III. Reporting of Activities in the Statement of Cash Flows


A. The total cash paid or received as consideration should be reported as net of cash and
cash equivalents acquired or disposed of.
B. The cash flows from investing and financing activities should be reported as gross by
major class of cash receipts and major class of cash payments which may be reported
on a net basis.
1. There is an exemption if cash paid and received is on behalf of the customers.
2. There is an exemption if cash paid and received is for items in which the turnover
is quick, the amounts are large, and the maturities are generally less than three
months.
3. There is an exemption if cash paid and received relates to deposits by financial
institutions.
C. Disclosures reported in the statement.
1. Transactions in investing and financing that do not require the use of cash should
not be included in the statement of cash flows, but it should be separately
disclosed elsewhere in the financial statements.
2. The significant cash and cash equivalents that are not available for use by the
entity should be disclosed with a commentary from the management.
3. Disclosures are reported in order to help enabled users evaluate changes in
liabilities arising from financing activities.

References:

‌admin. (2016). IAS 7 — Statement of Cash Flows. Retrieved February 17, 2022,

from Iasplus.com website: https://www.iasplus.com/en/standards/ias/ias7

PAS 7 Statement OF CASH Flows. (2019). Retrieved February 17, 2022, from

StuDocu website:

https://www.studocu.com/ph/document/palawan-state-university/bs-accounta

ncy/pas-7-statement-of-cash-flows/12501526

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