''Cash flows exclude movements between items that constitute cash or cash equivalents because these components are part of the cash management of an entity rather than part of its operating, investing and financing activities. Cash management includes the investment of excess cash in cash equivalents''
Integral part of financial statements; Cash flow try to
answer the two questions i) how the company is generating cash? And movement of
cash and cash equivalent items?
Cash and Cash equivalents
Cash in hand and demand deposits
Cash equivalents: short term investments (share are excluded)
Operating activities: Sale of Goods, Royalties, fees, commissions, employees, suppliers, income taxes
Investing activities: PPE, Intangibles, Development Costs, Equity,
advances loans to other parties, futures, forwards, options, swaps ( not
trading)
Financing activities: own share/equity instruments, loans,
notes, bonds, finance lease
What is difference between direct and indirect cash flows
Direct cash flow start with changes in cash receipts and
payments and ignoring non cash transactions, however in indirect approach takes
the net income and then adjust the changes in asset and liabilities accounts.
here is excelsheet example..
https://www.ifrs.org/content/dam/ifrs/publications/pdf-standards/english/2022/issued/part-a/ias-7-statement-of-cash-flows.pdf?bypass=on
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