International Financial Reporting Standards_guide.pdf

Chapter 4 Statement of Cash Flows (IAS 7) 39
4.4.9 When entities are equity or cost accounted, only actual cash flows from them (for
example, dividends received) are shown in the cash flow statement.
4.4.10 Cash flows from joint ventures are proportionately included in the statement of cash
flows if the joint venture is proportionally consolidated.
4.5 PRESENTATION AND DISCLOSURE
4.5.1 The following should be disclosed:
■ components of cash and cash equivalents in the statement of cash flows and a reconciliation
with the equivalent items in the statement of financial position;
■ details about noncash investing and financing transactions (for example, conversion of
debt to equity); and
■ amount of cash and cash equivalents that are not available for use by the group.
4.5.2 The following disclosure is suggested:
■ amount of undrawn borrowing facilities available for future operating activities and to
settle capital commitments (indicating any restrictions);
■ aggregate amount of cash flows from each of the three activities (operating, investing,
and financing) related to interest in joint ventures that are proportionally consolidated;
■ amount of cash flows arising from each of the three activities regarding each reportable
operating segment; and
■ distinction between the cash flows that represent an increase in operating capacity and
those that represent the maintenance of it.
4.5.3 The following should be shown in aggregate for either the purchase or sale of a subsidiary
or business unit:
■ total purchase or disposal consideration;
■ purchase or disposal consideration paid in cash and equivalents;
■ amount of cash and cash equivalents in the entity acquired or disposed; and
■ amount of assets and liabilities other than cash and cash equivalents in the entity
acquired or disposed.
4.6 FINANCIAL ANALYSIS AND INTERPRETATION
4.6.1 The IFRS statement of cash flows shows the sources of the cash inflows received by an
entity during an accounting period, and the purposes for which cash was used. The statement
is an integral part of the analysis of a business because it enables the analyst to determine
the following:
■ the ability of a company to generate cash from its operations;
■ the cash consequences of investing and financing decisions;
■ the effects of management’s decisions about financial policy;
■ the sustainability of a firm’s cash-generating capability;
■ how well operating cash flow correlates with net income;
■ the impact of accounting policies on the quality of earnings;
■ information about the liquidity and long-term solvency of a firm;
■ whether or not the going-concern assumption is reasonable; and
■ the ability of a firm to finance its growth from internally generated funds.