''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)

''Cash flows from operating activities are primarily derived from the principal revenue-producing activities of the entity''

 



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