An Executive Guide to IFRS: Content, Costs and Benefits to Business

Statement of Cash Flows

While IAS 1 provides that a Statement of Cash Flows is part of the reporting package, this statement has its own standard, IAS 7 Statement of Cash Flows. This is one of the few standards that the IASB has not been tempted to tinker with in recent years, although it too will ultimately be replaced in the financial statement presentation joint project with the FASB (Financial Accounting Standards Board). It was also the first standard to be accepted by the SEC as equivalent to the US standard on the subject.

IAS 7 follows the usual analysis of cash flows over:

• operating activities
• investing activities
• financing activities.

This [IAS 7 Statement of Cash Flows] was the first standard to be accepted by the SEC

The aggregate of these three has to be shown to be equal to the movement in cash and cash equivalents from balance sheet to balance sheet. ‘Cash equivalents’ is defined as near-liquid instruments that are expected to convert to cash in less than three months. It is likely that the replacement standard will eliminate the cash equivalents. Foreign currency translation differences that impact the carrying value of cash and cash equivalents are shown as an adjustment to the movement in cash balances.

The standard requires that tax, interest and dividends be separately identified in the statement of cash flows. It suggests that taxation would normally go under operating activities, but leaves entities a free choice for interest and dividends, received and ...