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Statement of Cash Flows. IAS 7 vs. FAS 95. versus. Same format choices and same three categories. IFRS . US GAAP. Direct or indirect format Operating Financing Investing. Direct or indirect format Operating Financing Investing. Other disclosures. IFRS. US GAAP.

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statement of cash flows

Statement of Cash Flows

IAS 7 vs. FAS 95

versus

same format choices and same three categories
Same format choices and same three categories

IFRS

US GAAP

  • Direct or indirect format
    • Operating
    • Financing
    • Investing
  • Direct or indirect format
    • Operating
    • Financing
    • Investing
other disclosures
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
what goes in the categories is not the same
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
ias 7 differences
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
operating activities
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.
investing activities
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

financing activities
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
statement of cash flows exercise 1 solution
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

statement of cash flows exercise 2
Statement of Cash Flows - Exercise 2

For each of the following, indicate how the transaction should be classified under both US GAAP and IFRS

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