Ias 7

7IAS 7 institutionwide Accounting exemplification 7 pedagogy of silver Flows This mag take inic variation takes amendments resulting from IFRSs issued up to 31 celestial latitude 2008. IAS 7 bullion Flow instructions was issued by the internationalist Accounting archetypes Committee in December 1992. It replaced IAS 7 Statement of Changes in fiscal Position (issued in October 1977). In April 2001 the International Accounting Standards Board resolved that both(prenominal) Standards and Interpretations issued at a lower place previous Constitutions continued to be applicable un slight and until they were amend or withdrawn.Since then, IAS 7 and its accompanying documents cod been amend by the following IFRSs IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (issued December 2003) IAS 21 The ca habit of Changes in Foreign deepen hostel (as revised in December 2003) IFRS 8 Operating Segments (issued November 2006)* IAS 23 Borrowing be (as revised in March 2007)* IAS 1 video display of fiscal Statements (as revised in September 2007)* IAS 27 Consolidated and get around mo authorizeary Statements (amended in January 2008) Improvements to IFRSs (issued May 2008). As a result of the changes in nomenclature make by IAS 1 in 2007, the backup of IAS 7 was changed to Statement of immediate carryment Flows. * good date 1 January 2009 effective date 1 July 2009 IASCF 999 IAS 7 confine INTERNATIONAL ACCOUNTING STANDARD 7 STATEMENT OF working not bad(p) FLOWSOBJECTIVE SCOPE BENEFITS OF hard bills in FLOW INFORMATION DEFINITIONS Cash and silver resemblings PRESENTATION OF A STATEMENT OF hard capital FLOWS Operating activities Investing activities Financing activities inform change FLOWS FROM OPERATING ACTIVITIES REPORTING CASH FLOWS FROM INVESTING AND FINANCING ACTIVITIES REPORTING CASH FLOWS ON A NET root FOREIGN CURRENCY CASH FLOWS arouse AND DIVIDENDS TAXES ON INCOME INVESTMENTS IN SUBSIDIARIES, ASS OCIATES AND JOINT VENTURES CHANGES IN OWNERSHIP INTERESTS IN SUBSIDIARIES AND OTHER BUSINESSES NON-CASH proceeding COMPONENTS OF CASH AND CASH EQUIVALENTS OTHER DISCLOSURES telling DATE APPENDICES A B Statement of notes persists for an entity severalise than a monetary institution Statement of property lights for a financial institution paragraphs 13 45 69 79 1017 1315 16 17 1820 21 2224 2528 3134 3536 3738 3942B 4344 4547 4852 5355 1000 IASCF IAS 7 International Accounting Standard 7 Statement of Cash Flows (IAS 7) is set forbidden in paragraphs 155. All the paragraphs throw equal authority but go for the IASC format of the Standard when it was adopted by the IASB.IAS 7 should be read in the context of its intention, the Preface to International Financial account Standards and the Framework for the Preparation and Presentation of Financial Statements. IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors provides a priming coat for selecting and cons ecrateing account policies in the absence of explicit guidance. IASCF 1001 IAS 7 International Accounting Standard 7 Statement of Cash Flows* Objective teaching or so the immediate payment coalesces of an entity is useful in providing users of financial storys with a basis to mensurate the great power of the entity to submit interchange and notes equivalents and the needs of the entity to utilise those gold flows.The economical decisions that argon taken by users overlook an evaluation of the ability of an entity to generate capital and specie equivalents and the time and certainty of their generation. The documentary of this Standard is to require the provision of knowledge some the historical changes in money and money equivalents of an entity by means of a tale of change flows which classifies property flows during the stopover from operate, expend and finance activities. Scope 1 An entity shall prep atomic number 18 a disceptation of change flows in accordance with the requirements of this Standard and shall map it as an inbuilt carve up of its financial statements for each completion for which financial statements ar prefaceed. 2 3 This Standard supersedes IAS 7 Statement of Changes in Financial Position, O.K. in July 1977.Users of an entitys financial statements be come toed in how the entity generates and uses notes and coin equivalents. This is the incident regardless of the nature of the entitys activities and ir complimentsive of whether bills lavatory be viewed as the product of the entity, as whitethorn be the case with a financial institution. Entities need stand in for essentially the aforesaid(prenominal) reasons however polar their straits revenue-producing activities exponent be. They need hard silver to conduct their operations, to birth their obligations, and to provide returns to their investors. Accordingly, this Standard requires all entities to present a statement of coin flows. Benefits of property flow instruction A statement of bills flows, when employ in coupling with the rest of the financial statements, provides information that enables users to judge the changes in bring in assets of an entity, its financial construction (including its fluidity and solvency) and its ability to affect the descends and time of gold flows in put up to conciliate to changing fortune and opportunities. Cash flow information is useful in assessing the ability of the entity to generate capital and hard currency equivalents and enables users to initiate models to assess and compargon the present treasure of the * In September 2007 the IASB amended the title of IAS 7 from Cash Flow Statements to Statement of Cash Flows as a effect of the revision of IAS 1 Presentation of Financial Statements in 2007. 1002 IASCF IAS 7 approaching bills flows of disparate entities.It excessively enhances the comparability of the insurance coverage of run performance by different entities because it eliminates the personal personal effects of using different chronicle treatments for the identical proceedings and events. 5 historical specie flow information is ofttimes used as an index finger of the beat, timing and certainty of future coin flows. It is as well useful in checking the accuracy of aside assessments of future coin flows and in examining the kind betwixt expediencyability and sort out alternate flow and the impact of changing prices. Definitions 6 The following terms atomic number 18 used in this Standard with the meanings specified Cash comp deck outs property on hand and contend deposits.Cash equivalents argon pithy-term, highly liquid places that ar right a dash convertible to cognize amounts of funds and which ar plain to an insignificant endangerment of changes in value. Cash flows ar inflows and outflows of hard currency and interchange equivalents. Operating activities ar the principal revenue -producing activities of the entity and modernistic(prenominal) activities that argon not drop or pay activities. Investing activities be the acquisition and disposal of long-run assets and former(a) investments not include in coin equivalents. Financing activities be activities that result in changes in the size and com send of the contributed beauteousness and borrowings of the entity. Cash and notes equivalents Cash equivalents atomic number 18 held for the purpose of meeting short-term property commitments quite an than for investment or former(a) purposes. For an investment to qualify as a change equivalent it must be readily convertible to a known amount of gold and be subject to an insignificant risk of changes in value. Therefore, an investment normally qualifies as a gold equivalent only when it has a short maturity of, say, ternion months or less from the date of acquisition. Equity investments be excluded from immediate payment equivalents unless th ey ar, in substance, property equivalents, for example in the case of preferred sh ars acquired within a short finish of their maturity and with a specified redemption date. Bank borrowings are generally considered to be funding activities.However, in some countries, bevel overdrafts which are repayable on demand form an integral touch off of an entitys change steering. In these circumstances, bank overdrafts are included as a contribution of interchange and coin equivalents. A characteristic of such banking arrangements is that the bank residual often fluctuates from being positive to overdrawn. Cash flows exclude movements among items that constitute specie or notes equivalents because these components are break in of the capital management of an entity rather than part of its direct(a), expend and funding activities. Cash management includes the investment of excess exchange in cash equivalents. 8 9 IASCF 1003 IAS 7Presentation of a statement of cash flows 10 The statement of cash flows shall composition cash flows during the period assort by operating(a), investiture and finance activities. 11 An entity presents its cash flows from operating, commit and financial backing activities in a sort which is most appropriate to its business. Classification by action provides information that allows users to assess the impact of those activities on the financial position of the entity and the amount of its cash and cash equivalents. This information whitethorn also be used to evaluate the relationships among those activities. A single transaction whitethorn include cash flows that are sort out ad differently.For example, when the cash repayment of a loan includes both evoke and capital, the p hold element whitethorn be categorise as an operating activity and the capital element is categorise as a financing activity. 12 Operating activities 13 The amount of cash flows arising from operating activities is a key indicator of the p urpose to which the operations of the entity have generated comfortable cash flows to repay loans, aver the operating capability of the entity, pay dividends and make new investments without recourse to external sources of financing. Information about(predicate) the specific components of historical operating cash flows is useful, in conjunction with former(a) information, in forecasting future operating cash flows. Cash flows from operating activities are principally derived from the principal revenue-producing activities of the entity.Therefore, they generally result from the proceeding and an some new(prenominal)(a)(prenominal) events that enter into the determination of turn a profit or red. Examples of cash flows from operating activities are (a) (b) (c) (d) (e) (f) (g) cash avail from the cut-rate sale of goods and the make of services cash measure income from royalties, fees, commissions and other revenue cash payments to suppliers for goods and services cash pa yments to and on behalf of employees cash benefit and cash payments of an insurance entity for premiums and claims, annuities and other policy benefits cash payments or refunds of income taxationes unless they can be specifically identified with financing and investing activities and cash good and payments from agreements held for proceeding or commerce purposes. 14Some sub judice proceeding, such as the sale of an item of make up, may give rise to a gain or mischief that is included in recognised profit or loss. The cash flows relating to such transactions are cash flows from investing activities. However, cash payments to fabricate or acquire assets held for rental to others and later held for sale as described in paragraph 68A of IAS 16 Property, Plant and Equipment are cash flows from operating activities. The cash tax revenue from rents and subsequent crude sales of such assets are also cash flows from operating activities. 1004 IASCF IAS 7 15 An entity may hold securities and loans for dealings or trading purposes, in which case they are similar to inventory acquired specifically for resale.Therefore, cash flows arising from the acquire and sale of dealing or trading securities are categorize as operating activities. Similarly, cash advances and loans make by financial institutions are unremarkably classify ad as operating activities since they preserve to the main revenue-producing activity of that entity. Investing activities 16 The separate disclosure of cash flows arising from investing activities is important because the cash flows oppose the issue to which expenditures have been made for resources intended to generate future income and cash flows. Examples of cash flows arising from investing activities are (a) cash payments to acquire property, plant and equipment, intangibles and other long-term assets.These payments include those relating to capitalised ontogeny approachs and self-constructed property, plant and equipme nt cash improvement from sales of property, plant and equipment, intangibles and other long-term assets cash payments to acquire candour or debt instruments of other entities and affaires in conjunction ventures (other than payments for those instruments considered to be cash equivalents or those held for dealing or trading purposes) cash receipts from sales of loveliness or debt instruments of other entities and interests in joint ventures (other than receipts for those instruments considered to be cash equivalents and those held for dealing or trading purposes) cash advances and loans made to other parties (other than advances and loans made by a financial institution) cash receipts from the repayment of advances and loans made to other parties (other than advances and loans of a financial institution) cash payments for futures contracts, forward contracts, plectron contracts and switch over contracts except when the contracts are held for dealing or trading purposes, or th e payments are classified as financing activities and cash receipts from futures contracts, forward contracts, option contracts and swap contracts except when the contracts are held for dealing or trading purposes, or the receipts are classified as financing activities. (b) (c) (d) (e) (f) (g) (h) When a contract is accounted for as a douse of an identifiable position the cash flows of the contract are classified in the same manner as the cash flows of the position being hedged. IASCF 1005 IAS 7 Financing activities 7 The separate disclosure of cash flows arising from financing activities is important because it is useful in predicting claims on future cash flows by providers of capital to the entity. Examples of cash flows arising from financing activities are (a) (b) (c) (d) (e) cash harvest-home from issuing shares or other equity instruments cash payments to owners to acquire or redeem the entitys shares cash proceeds from issuing debentures, loans, notes, bonds, mortgages an d other short or long-term borrowings cash repayments of amounts borrowed and cash payments by a lessee for the reduction of the outstanding indebtedness relating to a finance lease. Reporting cash flows from operating activities 8 An entity shall report cash flows from operating activities using either (a) the contain method, whereby major classes of gross cash receipts and gross cash payments are reveal or the in acquit method, whereby profit or loss is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of preceding(a) or future operating cash receipts or payments, and items of income or outgo cogitated with investing or financing cash flows. (b) 19 Entities are encouraged to report cash flows from operating activities using the direct method. The direct method provides information which may be useful in estimating future cash flows and which is not procurable chthonic the indirect method.Under the direct method, information about maj or classes of gross cash receipts and gross cash payments may be obtained either (a) (b) from the accounting records of the entity or by adjusting sales, exist of sales (interest and similar income and interest expense and similar charges for a financial institution) and other items in the statement of citywide examination income for (i) (ii) (iii) changes during the period in inventories and operating receivables and payables other non-cash items and other items for which the cash effects are investing or financing cash flows. 20 Under the indirect method, the net cash flow from operating activities is compulsive by adjusting profit or loss for the effects of (a) changes during the period in inventories and operating receivables and payables 1006 IASCF IAS 7 (b) on-cash items such as depreciation, provisions, deferred taxes, unrealised unusual currency gains and losses, and undistributed cyberspace of associates and all other items for which the cash effects are investing or financing cash flows. (c) Alternatively, the net cash flow from operating activities may be presented under the indirect method by viewing the revenues and expenses disclosed in the statement of comprehensive income and the changes during the period in inventories and operating receivables and payables. Reporting cash flows from investing and financing activities 21 An entity shall report one after another major classes of gross cash receipts and gross cash payments arising from investing and financing activities, except to the extent that cash flows described in paragraphs 22 and 24 are account on a net basis. Reporting cash flows on a net basis 2 Cash flows arising from the following operating, investing or financing activities may be reported on a net basis (a) cash receipts and payments on behalf of customers when the cash flows reflect the activities of the customer rather than those of the entity and cash receipts and payments for items in which the turnover rate is quick , the amounts are large, and the maturities are short. (b) 23 Examples of cash receipts and payments referred to in paragraph 22(a) are (a) (b) (c) the word meaning and repayment of demand deposits of a bank funds held for customers by an investment entity and rents collected on behalf of, and stipendiary over to, the owners of properties. Examples of cash receipts and payments referred to in paragraph 22(b) are advances made for, and the repayment of (a) (b) (c) 24 principal amounts relating to credit card customers the purchase and sale of investments and other short-term borrowings, for example, those which have a maturity period of three months or less.Cash flows arising from each of the following activities of a financial institution may be reported on a net basis (a) cash receipts and payments for the acceptance and repayment of deposits with a fixed maturity date the placement of deposits with and withdrawal of deposits from other financial institutions and (b) IASCF 1007 IAS 7 (c) cash advances and loans made to customers and the repayment of those advances and loans. Foreign currency cash flows 25 Cash flows arising from transactions in a overseas currency shall be recorded in an entitys structural currency by applying to the inappropriate currency amount the telephone exchange rate between the functional currency and the unknown currency at the date of the cash flow. The cash flows of a foreign subsidiary shall be translated at the exchange rates between the functional currency and the foreign currency at the dates of the cash flows. 26 7 Cash flows denominated in a foreign currency are reported in a manner consistent with IAS 21 The Effects of Changes in Foreign Exchange Rates. This permits the use of an exchange rate that approximates the actual rate. For example, a weighted average exchange rate for a period may be used for recording foreign currency transactions or the edition of the cash flows of a foreign subsidiary. However, IAS 21 d oes not permit use of the exchange rate at the end of the coverage period when translating the cash flows of a foreign subsidiary. Unrealised gains and losses arising from changes in foreign currency exchange rates are not cash flows.However, the effect of exchange rate changes on cash and cash equivalents held or due in a foreign currency is reported in the statement of cash flows in order to reconcile cash and cash equivalents at the offset and the end of the period. This amount is presented independently from cash flows from operating, investing and financing activities and includes the differences, if any, had those cash flows been reported at end of period exchange rates. Deleted 28 29 30 Deleted worry and dividends 31 Cash flows from interest and dividends veritable and paid shall each be disclosed separately. Each shall be classified in a consistent manner from period to period as either operating, investing or financing activities. 32The inwardness amount of interest pa id during a period is disclosed in the statement of cash flows whether it has been recognised as an expense in profit or loss or capitalised in accordance with IAS 23 Borrowing Costs. Interest paid and interest and dividends received are usually classified as operating cash flows for a financial institution. However, there is no consensus on the smorgasbord of these cash flows for other entities. Interest paid and interest and dividends received may be classified as operating cash flows because they enter into the determination of profit or loss. Alternatively, interest paid and interest and dividends received may be classified as financing cash flows and investing cash flows respectively, because they are costs of obtaining financial resources or returns on investments. 33 1008 IASCF IAS 7 34Dividends paid may be classified as a financing cash flow because they are a cost of obtaining financial resources. Alternatively, dividends paid may be classified as a component of cash flows from operating activities in order to assist users to determine the ability of an entity to pay dividends out of operating cash flows. Taxes on income 35 Cash flows arising from taxes on income shall be separately disclosed and shall be classified as cash flows from operating activities unless they can be specifically identified with financing and investing activities. 36 Taxes on income get hold on transactions that give rise to cash flows that are classified as operating, investing or financing activities in a statement of cash flows.While tax expense may be readily identifiable with investing or financing activities, the related tax cash flows are often impracticable to chance upon and may arise in a different period from the cash flows of the underlying transaction. Therefore, taxes paid are usually classified as cash flows from operating activities. However, when it is practicable to identify the tax cash flow with an somebody transaction that gives rise to cash flows that a re classified as investing or financing activities the tax cash flow is classified as an investing or financing activity as appropriate. When tax cash flows are allocated over much than one class of activity, the essential amount of taxes paid is disclosed. Investments in subsidiaries, associates and joint ventures 7 When accounting for an investment in an associate or a subsidiary accounted for by use of the equity or cost method, an investor restricts its reporting in the statement of cash flows to the cash flows between itself and the investee, for example, to dividends and advances. An entity which reports its interest in a jointly controlled entity (see IAS 31 Interests in Joint Ventures) using harmonious integration, includes in its consolidated statement of cash flows its proportionate share of the jointly controlled entitys cash flows. An entity which reports such an interest using the equity method includes in its statement of cash flows the cash flows in respect of its investments in the jointly controlled entity, and distributions and other payments or receipts between it and the jointly controlled entity. 38Changes in willpower interests in subsidiaries and other businesses 39 The meat cash flows arising from obtaining and losing control of subsidiaries or other businesses shall be presented separately and classified as investing activities. An entity shall disclose, in substance, in respect of both obtaining and losing control of subsidiaries or other businesses during the period each of the following (a) the total regard paid or received 40 IASCF 1009 IAS 7 (b) (c) the portion of the consideration consisting of cash and cash equivalents the amount of cash and cash equivalents in the subsidiaries or other businesses over which control is obtained or disjointed and the amount of the assets and liabilities other than cash or cash equivalents in the subsidiaries or other businesses over which control is obtained or lost, summarised by each m ajor category. (d) 41The separate foundation of the cash flow effects of obtaining or losing control of subsidiaries or other businesses as single line items, together with the separate disclosure of the amounts of assets and liabilities acquired or sell of, helps to get laid those cash flows from the cash flows arising from the other operating, investing and financing activities. The cash flow effects of losing control are not deducted from those of obtaining control. The aggregate amount of the cash paid or received as consideration for obtaining or losing control of subsidiaries or other businesses is reported in the statement of cash flows net of cash and cash equivalents acquired or disposed of as part of such transactions, events or changes in circumstances. Cash flows arising from changes in self-command interests in a subsidiary that do not result in a loss of control shall be classified as cash flows from financing activities.Changes in ownership interests in a subsidia ry that do not result in a loss of control, such as the subsequent purchase or sale by a rise up of a subsidiarys equity instruments, are accounted for as equity transactions (see IAS 27 Consolidated and Separate Financial Statements (as amended in 2008)). Accordingly, the resulting cash flows are classified in the same way as other transactions with owners described in paragraph 17. 42 42A 42B Non-cash transactions 43 Investing and financing transactions that do not require the use of cash or cash equivalents shall be excluded from a statement of cash flows. Such transactions shall be disclosed elsewhere in the financial statements in a way that provides all the relevant information about these investing and financing activities. 44Many investing and financing activities do not have a direct impact on up-to-date cash flows although they do affect the capital and asset structure of an entity. The exclusion of non-cash transactions from the statement of cash flows is consistent wit h the objective of a statement of cash flows as these items do not involve cash flows in the current period. Examples of non-cash transactions are (a) (b) (c) the acquisition of assets either by take for granted directly related liabilities or by means of a finance lease the acquisition of an entity by means of an equity issue and the conversion of debt to equity. 1010 IASCF IAS 7 Components of cash and cash equivalents 5 An entity shall disclose the components of cash and cash equivalents and shall present a balancing of the amounts in its statement of cash flows with the equivalent items reported in the statement of financial position. 46 In view of the shape of cash management practices and banking arrangements around the world and in order to comply with IAS 1 Presentation of Financial Statements, an entity discloses the policy which it adopts in determining the composition of cash and cash equivalents. The effect of any change in the policy for determining components of cas h and cash equivalents, for example, a change in the classification of financial instruments previously considered to be part of an entitys investment portfolio, is reported in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. 47 Other disclosures 8 An entity shall disclose, together with a commentary by management, the amount of significant cash and cash equivalent balances held by the entity that are not available for use by the group. 49 There are various circumstances in which cash and cash equivalent balances held by an entity are not available for use by the group. Examples include cash and cash equivalent balances held by a subsidiary that operates in a coarse where exchange controls or other legal restrictions apply when the balances are not available for general use by the parent or other subsidiaries. Additional information may be relevant to users in understanding the financial position and liquidity of an entity.Disclosure of this in formation, together with a commentary by management, is encouraged and may include (a) the amount of undrawn borrowing facilities that may be available for future operating activities and to manufacture capital commitments, indicating any restrictions on the use of these facilities the aggregate amounts of the cash flows from each of operating, investing and financing activities related to interests in joint ventures reported using proportionate consolidation the aggregate amount of cash flows that represent increases in operating condenser separately from those cash flows that are required to reserve operating capacity and the amount of the cash flows arising from the operating, investing and financing activities of each reportable segment (see IFRS 8 Operating Segments). 50 (b) (c) (d) IASCF 1011 IAS 7 51The separate disclosure of cash flows that represent increases in operating capacity and cash flows that are required to maintain operating capacity is useful in enabling the user to determine whether the entity is investing adequately in the maintenance of its operating capacity. An entity that does not invest adequately in the maintenance of its operating capacity may be prejudicing future profitability for the involvement of current liquidity and distributions to owners. The disclosure of metameric cash flows enables users to obtain a weaken understanding of the relationship between the cash flows of the business as a social unit and those of its component parts and the availability and variability of segmental cash flows. 52 efficient date 53 54 This Standard becomes operative for financial statements covering periods beginning on or after 1 January 1994.IAS 27 (as amended in 2008) amended paragraphs 3942 and added paragraphs 42A and 42B. An entity shall apply those amendments for yearly periods beginning on or after 1 July 2009. If an entity applies IAS 27 (amended 2008) for an ahead period, the amendments shall be utilise for that earlier pe riod. The amendments shall be applied retrospectively. Paragraph 14 was amended by Improvements to IFRSs issued in May 2008. An entity shall apply that amendment for one-year periods beginning on or after 1 January 2009. Earlier application is permitted. If an entity applies the amendment for an earlier period it shall disclose that fact and apply paragraph 68A of IAS 16. 55 1012 IASCF