Transcript ACT 3216 ADVANCED FINANCIAL ACCOUNTING 1

FRS 107 Statement of Cash Flow
Learning Outcomes:
 Understand the rationale and principles of CFS
 Able to deal with the procedures of preparing CFS
 Know the disclosures requirements by the standard
1
Introduction
FRS 107
 Requires companies to present cash flow statement
 Provide Information on:
 Cash inflow, and
 Cash outflow
** Summary of company’s cash book

Information about the changes in cash and cash
equivalents during a fiscal year:
2
Cont.


Cash
-- Cash in hand/at the bank
Cash equivalents
-- Short term & highly liquid investments that can be
converted into cash at anytime and do not change
significantly in value
--e.g. short-term fixed deposits, treasury bills, marketable
securities (bankers’ acceptances, negotiable certificate of
deposit), bank overdrafts.
3
Cont.
Rationale of CFS
A user wants to assess the ability of a company in
managing its cash for daily operation. Another user wants
to know how much cash has been received from
investments and how much cash spent for paying back
loan during the year.
Which financial statement provides such information?
Can the income statement & balance sheet provide
enough information?
4
Cont.
Presentation of CFS
Shows an entity’s cash and cash equivalents, inflows (all
cash receipts) & outflows (payments) from three categories
of activities;
1.
Operating
2.
Investing
3.
Financing
5
Cont.
Operating Activities:
 Refers to any cash receipts & payments derived from
the principal revenue-generating activities include
revenues, expenses, gains & losses transactions.

Examples: cash receipts from customers from the sales
of goods, cash payment to employees.

Indicator of the extent to which the operations of the
enterprise have generated sufficient cash flows to repay
loans, maintain the operating capability of the enterprise,
pay dividends and make new investments without
recourse to external sources of financing.
6
Cont.
Investing Activities:
 Refers to any cash receipts & payments derived from
the assets & resources that are used to generate future
income and cash inflow.

Cash transactions involving the acquisition & disposal of
non-current assets. Also related to investment in other
entities & short term investment (not cash equivalent)

Examples: cash payment to acquire PPE, cash receipts
from disposal of those PPE.

Indicate how far the enterprise is expanding and the
implication on future cash flow or income.
7
Cont.
Financing Activities:
 Refers to any cash receipts & payments obtained from
or paid to investors and creditors – the providers of
capital

Examples: cash proceeds & payments to/from issuing
shares or other equity instruments (debentures)
8
Cont.
Other Items:
Interest & Dividend

Interest paid & dividend paid may be classified as
operating or financing activities.
Argument: determining net income or cost of obtaining
capital resources

Interest received & dividend received may be classified
as operating or investing activities.
Argument: determining net income or return from
investment made by entity
9
Cont.
Reporting CF from Operating Activities:

An entity should report cash flows from operating activities
using either:

direct method: whereby major classes of gross cash
receipts and gross cash payments are disclosed; or

indirect method: whereby net profit or loss (before tax)
is adjusted for the effects of transactions of a non-cash
nature, any deferrals or accruals of past or future
operating cash receipts or payments, and items of
income or expense associated with investing or
financing cash flows.
10
Presentation of Statement of Cash Flow
ABC Berhad
Statement of Cash Flow for the year ended 31 December 20x1
Cash Flows From Operating Activities:
……….
……….
……….
Net cash from / (used) in operating activities
XXX
XXX
(XXX)
XXX
Cash Flows From Investing Activities:
……….
……….
……….
Net cash from / (used) in investing activities
XXX
XXX
(XXX)
(XX)
Cash Flows From Financing Activities:
……….
……….
Net cash from / (used) in financing activities
XXX
(XXX)
(XX)
Net INCREASE / (DECREASE) in cash and cash equivalents
Cash and Cash equivalent at beginning of the period
XXX
XXX
Cash and cash equivalent at end of the period
XXX
11
Direct Method
RM
Cash from Operating Activities
Cash Receipts from Customers
Cash Paid to Suppliers and Employees
Cash Generated from Operations
Interest Paid (Can also be in financing)
Interest Received (Can also be in investing)
Dividend Paid (Can also be in financing)
Dividend Received (Can also be in investing)
Income taxes Paid
Net cash flow from operating activities
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XXX
(XXX)
XXX
(XXX)
XXX
(XXX)
XXX
(XXX)
XXX
Indirect Method
Cash flow from Operating Activities
Net Profit Before Taxation:
Adjustment:
Depreciation
Interest Expense
Investment Income
Disposal of Asset
Operating profit before working capital changes
Increase/Decrease in Receivables
Increase/Decrease in Inventories
Increase/Decrease in Payables
Cash generated from Operations
Interest Paid
Income Tax Paid
Dividend Paid
Net Cash from Operating Activities
13
RM
XXX
RM
XXX
XXX
(XXX)
(XXX)
XXX
(XXX)/XXX
(XXX)/XXX
XXX/(XXX)
XXX
(XXX)
(XXX)
(XXX)
XXX