Cash Flow

Question 1

component of an entity that has been disposed of or classified as held for sale.

Answer 1

Discontinued Operations

Question 2

Characteristics:
Represents a separate major line of business or geographical area of operations.
Part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations.
Subsidiary acquired exclusively with a view to resale.

Answer 2

Discontinued Operations

Question 3

Integral part of primary financial statements.

Answer 3

Statement of Cash Flow

Question 4

Cash flows classified into

Answer 4

operating, investing, and financing activities

Question 5

Effective period of Cash Flow

Answer 5

Financial statements from periods beginning on or after January 1, 1994

Question 6

Summary of Cash Flow (Objective)

Answer 6

• Present historical changes in cash and cash equivalents by classifying cash flows into operating, investing, and financing.
• Aid in evaluating net assets, financial structure, and cash flow adaptability.
• Facilitate comparison and assessment of present value of future cash flows.

Question 7

Summary of Cash Flow (Benefits)

Answer 7

• Assess entity’s cash generation ability.
• Develop models for comparing future cash flows.
• Check accuracy of past cash flow assessments and relationship between profitability and net cash flow.
• Enhance comparability of operating performance reporting.

Question 8

• preferred shares acquired within three months of their specified redemption date.
• Bank overdrafts which are repayable on demand, and which form an integral part of an entity’s cash management are also included as a component of cash and cash equivalents. [IAS 7.7-8.

Answer 8

Cash and Cash Equivalents

Question 9

• cash on hand and demand deposits,
• short-term, highly liquid investments that are readily convertible to a known amount of cash, and that are subject to an insignificant risk of changes in value.
• investment that normally meets the definition of a cash equivalent when it has a maturity of three months or less from the date of acquisition.
• Equity investments are normally excluded, unless they are in substance a cash equivalent

Answer 9

Cash and Cash Equivalents

Question 10

are the main revenue-producing activities of the entity that are not investing or financing activities, so operating cash flows include cash received from customers and cash paid to suppliers and employees [IAS 7.14]

Answer 10

Operating Activities

Question 11

• are the principal revenue-producing activities of the entity and other activities that are not investing or financing activities.
• they generally result from the transactions and other events that enter into the determination of profit or loss.
• An entity shall report cash flows from operating activities using either: the direct method, or the indirect method

Answer 11

Operating Activities Cash Flows

Question 12

The major class of gross cash receipts and gross cash payments.
* 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 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.
* cash payments to manufacture or acquire assets held for rental to others and subsequently held for sale as described in paragraph
68A of IAS 16 Property, Plant and Equipment
* cash flows arising from the purchase and sale of dealing or trading securities.
* cash advances and loans made by financial institutions since they relate to the main revenue-producing activity of that entity.

Answer 12

Operating Activities Cash Flows (Direct Method)

Question 13

are the acquisition and disposal of long-term assets and other investments that are not considered to be cash equivalents [IAS 7.6]

Answer 13

Investing Activities

Question 14

• are activities that alter the equity capital and borrowing structure of the entity [IAS 7.6]
• interest and dividends received and paid may be classified as operating, investing, or financing cash flows, provided that they are classified .consistently from period to period [IAS 7.31]
• cash flows arising from taxes on income are normally classified as operating, unless they can be specifically identified with financing or investing activities [IAS 7.35]

Answer 14

Financing Activities

Question 15

*Disclosed separately, classified consistently.
*Interest paid and received can be operating, investing, or financing activities.
*Dividends paid may be financing activities or part of operating cash flows.

Answer 15

Interest and Dividends

Question 16

Disclosed separately, classified as operating unless specifically identified with financing or investing activities.

Answer 16

Taxes on Income

Question 17

*Excluded from statement of cash flows but disclosed elsewhere.

*Examples: acquisition of assets, conversion of debt to equity.

Answer 17

Non-cash Transaction

Question 18

Foreign Currency

Answer 18

• Cash flows in foreign currency recorded in entity’s functional currency.

-Foreign subsidiary cash flows translated at exchange rates.

Question 19

Cash Flows Investing and Financing Activities

Answer 19

• Exclude non-cash investing and financing transactions from the statement of cash flows, but disclose them separately elsewhere in financial statements (LAS 7.43).
• Disclose information enabling users to evaluate changes in liabilities from financing activities (IAS 7.44A-44E).
• Disclose details of supplier finance arrangements to assess effects on liabilities, cash flows, and liquidity risk (IAS 7.44F).
• Disclose components of cash and cash equivalents with a reconciliation to amounts in the statement of financial position (IAS 7.45).
• Disclose cash and cash equivalents not available for group use with management commentary (IAS 7.48).

Question 21

Changes in Ownership Interests

Answer 21

• Present aggregate cash flows from obtaining or losing control of subsidiaries separately as investing activities.
• Disclose total consideration, portion in cash, cash and cash equivalents, assets, and liabilities for each major category for obtained or lost control.

Question 22

Changes in Liabilities from Financing Activities

Answer 22

Provide disclosures for changes in liabilities from financing activities, including cash flow and non-cash changes.

Question 23

Components of Cash and Cash Equivalents

Answer 23

Disclose components of cash and cash equivalents and reconcile with the statement of financial position.

Question 24

Other Disclosures

Answer 24

Disclose significant cash and cash equivalent balances not available for group use with management commentary.

Question 25

Adjusts net profit or loss for the effects of:
* changes during the period in inventories and operating receivables and payables
* non-cash items such as depreciation, provisions, deferred taxes, unrealized foreign currency, gains and losses, and undistributed profits of associates
* all other items for which the cash effects are investing or financing cash flows

Answer 25

Operating Activities Cash Flows (Indirect Method)

Question 26

• are those centered in support of the operations
• These are important because the cash flows represent the extent to which expenditures have been made for resources intended to generate future income and cash flows.
• Only expenditures that result in a recognized asset in the statement of financial position are eligible for classification as investing activities

Answer 26

Cash Flows (Investing Activities)

Question 27

Cash flows arising from ______ activities are
* cash payments to acquire property, plant and equipment, intangibles and other long-term assets
* cash receipts from sales of property, plant and equipment intangibles and other long-term assets
* cash payments to acquire equity or debt instruments of other entities and interests in joint ventures (other than trading)
* cash receipts from sales of equity or debt instruments of other entities and interests in joint ventures (other than trading)
* 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 receipts and payments for futures contracts, forward contracts, option contracts and swap contract (other than trading)

Answer 27

investing

Question 28

Are useful in predicting claims on future cash flows by providers of capital to the entity

Answer 28

Cash Flows Financing Activities