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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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