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IAS 7: Statement of Cash Flows

IAS 7: Statement of Cash Flows. Michael Bogdanoff ACCT 4370 Fall 2008. Review of Statement of Cash Flows.

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IAS 7: Statement of Cash Flows

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  1. IAS 7: Statement of Cash Flows Michael Bogdanoff ACCT 4370 Fall 2008

  2. Review of Statement of Cash Flows • The objective of IAS 7 is to require the presentation of information about the historical changes in cash and cash equivalents of an enterprise by means of a statement of cash flows, which classifies cash flows during the period according to operating, investing, and financing activities. 1

  3. Review of Statement of Cash Flows Three main sections as described by IAS 7: 2 • Operating Activities are the principal revenue-producing activities of the entity and other activities that are not investing or financing activities. • Investing Activities are the acquisition and disposal of long-term assets and other investments not included in cash equivalents. • Financing Activities are activities that result in changes in the size and composition of the contributed equity and borrowings of the entity.

  4. Foreign Currency Cash Flows 2 • Cash flows arising from transactions in a foreign currency shall be recorded in an entity’s functional currency by applying the exchange rate at the date of the cash flow. • Unrealized gains and losses arising from changes in foreign currency rates are not cash flows. However, the effect of exchange rate changes on cash and cash equivalents held or due in a foreign currency is reported in the cash flow statement in order to reconcile cash and cash equivalents at the beginning and end of the period.

  5. Cash and Cash Equivalents 2 • An entity shall disclose the components of cash and cash equivalents and shall present a reconciliation of the amounts in its cash flow statement with the equivalent items reported in the balance sheet.

  6. Direct vs. Indirect Method 3 • Operating Activites section only • Direct - Major classes of gross cash receipts and gross cash payments are disclosed • Indirect - Profit or loss for the period is adjusted for non-cash items, and items of income or expense related to investing or financing activities • IAS 7 encourages the use of the direct method

  7. IAS 7 vs. US GAAP 4

  8. IAS 7 vs. US GAAP 4

  9. IAS 7 vs. US GAAP 4

  10. IAS 7 vs. US GAAP 4

  11. IAS 7 vs. US GAAP 4

  12. IAS 7 vs. US GAAP 4

  13. IAS 7 vs. US GAAP 4

  14. IAS 7 vs. US GAAP 4

  15. Footnotes 1 Source: Deloitte Touche Tohmatsu, 2008, “IAS Plus International Accounting Standards IAS 7, Statement of Cash Flows”, www.iasplus.com/standard/ias07.htm 28 Nov 2008 2 Source: IASC Foundation Education, “Technical Summary - IAS 7 Cash Flow Statements”, www.iasb.org/NR/rdonlyres/8C532526-9CE7-49B6-84BB-446BEDA65541/0/IAS7.pdf 28 Nov 2008 • Source: CPA (Ireland), “Web Summaries - IAS 7: Cash Flow Statements”, www.cpaireland.ie/UserFiles/File/Technical%20Resources/Financial%20Reporting%20Standards/IAS/IASB%20Summaries/ias%2007.pdf 29 Nov 2008 • Source: Grant Thornton, “Comparison between U.S. GAAP and International Financial Reporting Standards”, Edition 1.1 — June 15, 2007, www.grantthornton.com/staticfiles/GTCom/files/AboutUS/Assurance_thought_leadership/Grant_Thornton_U%20S%20_GAAP_v_IFRS_Comparison.pdf 28 Nov 2008

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