Statement of Cash Flows

1. Statement of Cash Flows IAS 7 vs. FAS 95 versus

2. Same format choices and same three categories IFRS US GAAP • Direct or indirect format • Operating • Financing • Investing • Direct or indirect format • Operating • Financing • Investing

3. Other disclosures IFRS US GAAP • Noncash financing and investing activities must be disclosed elsewhere – not on the face of the SCF • Reconciliation of cash and cash equivalents to balance sheet • Noncash financing and investing activities must be disclosed – generally in notes

4. What goes in the categories is NOT the same! • US GAAP: Some categories never made very good sense: Interest paid, interest received, and dividends received are all classified as operating so IFRS is probably an improvements! • The differences are not entirely obvious from just reading the IFRS “lists” of what goes where! • See para. 31-34 on interest an dividends • See para. 35-35 on taxes

5. IAS 7 – differences • Required Statement – no exemptions to certain investment entities • Bank overdrafts are “cash and cash equivalents” • Primary difference with US GAAP is in classification • Provides greater flexibility • Must separately disclose on the statement • interest and dividends received and paid • Income taxes • This is also true for US GAAP but might require a separate disclosure if these items are reported under multiple categories under IFRS

6. Operating activities • Examples of cash flows from operating activities are: • cash receipts from the sale of goods and the rendering of services; • cash receipts from royalties, fees, commissions and other revenue; • cash payments to suppliers for goods and services; • cash payments to and on behalf of employees; • cash receipts and cash payments of an insurance entity for premiums and claims, annuities and other policy benefits; • cash payments or refunds of income taxes unless they can be specifically identified with financing and investing activities; and • cash receipts and payments from contracts held for dealing or trading purposes.

7. Investing activities • Examples of cash flows arising from investing activities are: • cash payments to acquire PP&E. intangibles and other long-term assets • cash receipts from sales of PP&E, intangibles and other long-term assets • cash payments to acquire investments including joint ventures, futures contracts and other derivatives* • cash receipts from sales investments and joint ventures, futures contracts and other derivatives* • cash advances and loans made to other parties • cash receipts from the repayment of advances and loans made to other parties * other than cash flows related to instruments considered to be cash equivalents and those held for dealing or trading purposes

8. Financing activities • Examples of cash flows arising from financing activities are: • cash proceeds from issuing shares or other equity instruments • cash payments to owners to acquire or redeem the entity’s shares • cash proceeds from issuing debentures, loans, notes, bonds, mortgages and other short or long-term borrowings; • cash repayments of amounts borrowed • cash payments by a lessee for the reduction of the outstanding liability relating to a finance lease

9. Statement of Cash Flows (continued)

10. Statement of Cash Flows - Exercise 1 Solution For each of the following, indicate how the transaction should be classified under both US GAAP and IFRS

11. Statement of Cash Flows - Exercise 2 For each of the following, indicate how the transaction should be classified under both US GAAP and IFRS