CONCEPTUAL FRAMEWORK AND g) Cash payments for future contract, forward contract,

ACCOUNTING STANDARDS (CFAS) option contract and swap contract

h) Cash receipts from future contract, forward contract,
option contract and swap contract
Financing Activities are the cash flows derived from the equity
PAS 7 Statement of Cash Flows capital and borrowings of the entity. It includes the cash
Statement of cash flows flows from transactions involving nontrade liabilities and
A component of the financial statements which summarizes equity of an entity.
the operating, investing and financing activities of an a) Cash receipts from issuance of ordinary and preference
entity shares
Provides information about the cash receipts and cash b) Cash payments to acquire treasury shares
payments of an entity during a period. c) Cash receipts from issuing debentures, loans, notes, bonds,
An entity shall prepare a statement of cash flows and mortgages, and other short or long term borrowings
present it an integral part of the financial statements are d) Cash payments for amounts borrowed
presented. e) Cash payments by lease for the reduction of the
Operating Activities are the cash flows derived primarily from outstanding principal lease liability.
the principal revenue producing activities of the entity. It Classification of cash flows
results from transactions and other events that enter into the Cash flows are inflows and outflows of cash and cash
determination of net income or loss. equivalents
a) Cash receipts from sale of goods and rendering of services 1. Operating Activities
b) Cash receipts from royalties, rental, fees, commissions and 2. Investing Activities
other revenue 3. Financing Activities
c) Cash payments to suppliers for goods and services Cash flows that result from transactions:
d) Cash payments to selling, administrative and other Between the entity and the owners – equity financing
expenses Between the entity and the creditors – debt financing
e) Cash receipts and cash payments of an insurance entity for Cash payments to settle such obligations as trade accounts
premiums and claims, annuities and other policy and notes payable, income tax payable, accrued expenses
benefits are operating activities, not financing activities.
f) Cash payments or refunds of income taxes unless
specifically identified with financing and investing activities
g) Cash receipts and payments for securities held for trading
Trading securities Noncash transactions
Cash flows arising from the purchase and sale of dealing or The statement of cash flows is strictly a cash concept.
trading securities are classified as operating activities Noncash transactions are disclosed separately:
Cash advances and loans made by a financial institution are Acquisition of asset by assuming directly related liability
usually classifies as operating activities since they Acquisition of asset by issuing share capital
relate to the main revenue producing activity of that entity Acquisition of asset by issuing bonds payable
Investing Activities are the cash flows derived from Conversion of bonds payable into share capital
the acquisition and disposal of long-term assets and Conversion of preference shares into ordinary shares
other Interest
investments not included in cash equivalents. It includes cash Interest paid and interest received shall be classified
flow from transactions involving non-operating assets. as operating cash flows because they enter into the
a) Cash payments to acquire property, plant and equipment, determination of net income or loss.
intangibles and other long-term assets Alternatively, interest paid may be classified as financing
b) Cash receipts from sales of property, plant and equipment, cash flow because it is a cost of obtaining financial
intangibles and other long-term assets resources.
c) Cash payments to acquire equity or debt instruments of Alternatively, interest received may be classified as investing
other entities (current and long-term investments) cash flows because it is a return on investment.
d) Cash receipts from sales of equity or debt instruments of For a financial institution, interest paid and interest received
other entities are usually classified as operating cash flows.
e) Cash advances and loans to other parties other than Dividends
advances and loans made by financial institution Dividend received shall be classified as operating cash flow
f) Cash receipts from repayment of advances and loans made because it enters into the determination of net
to other parties income.
Alternatively, dividend received may be classified as investing
cash flow because it is a return on investment.
Dividend paid shall be classified as financing cash flow
because it is a cost of obtaining financial resources.
Dividend paid may be classified as operating cash flow in
order to assist users to determine the ability of the
entity to pay dividends out of operating cash flows.
Income taxes
Cash flows arising from income taxes shall be separately
disclosed as cash flows from operating activities unless
they can be specifically identified with investing and financing
activities.
Tax cash flows are often difficult to match to the originating
underlying transaction, so most of the time all tax
cash flows are classified as arising from operating activities