Contents
INTERNATIONAL ACCOUNTING STANDARD 7
STATEMENT OF CASH FLOWS
OBJECTIVE
SCOPE
1
BENEFITS OF CASH FLOW INFORMATION
4
DEFINITIONS
6
Cash and cash equivalents
7
PRESENTATION OF A STATEMENT OF CASH FLOWS
10
Operating activities
13
Investing activities
16
Financing activities
17
REPORTING CASH FLOWS FROM OPERATING ACTIVITIES
18
REPORTING CASH FLOWS FROM INVESTING AND FINANCING ACTIVITIES
21
REPORTING CASH FLOWS ON A NET BASIS
22
FOREIGN CURRENCY CASH FLOWS
25
INTEREST AND DIVIDENDS
31
TAXES ON INCOME
35
INVESTMENTS IN SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES
37
CHANGES IN OWNERSHIP INTERESTS IN SUBSIDIARIES AND OTHER BUSINESSES
39
NON-CASH TRANSACTIONS
43
CHANGES IN LIABILITIES ARISING FROM FINANCING ACTIVITIES
44A
SUPPLIER FINANCE ARRANGEMENTS
44F
COMPONENTS OF CASH AND CASH EQUIVALENTS
45
OTHER DISCLOSURES
48
EFFECTIVE DATE AND TRANSITION
53
APPROVAL BY THE BOARD OF
DISCLOSURE INITIATIVE
(AMENDMENTS TO IAS 7) ISSUED IN JANUARY 2016
APPROVAL BY THE BOARD OF
SUPPLIER FINANCE ARRANGEMENTS
ISSUED IN MAY 2023
FOR THE ACCOMPANYING GUIDANCE LISTED BELOW, SEE PART B OF THIS EDITION
ILLUSTRATIVE EXAMPLES
FOR THE BASIS FOR CONCLUSIONS, SEE PART C OF THIS EDITION
BASIS FOR CONCLUSIONS
DISSENTING OPINION
International Accounting Standard 7
Statement of Cash Flows
(IAS 7) is set out in
paragraphs 1–65
. All the paragraphs have equal authority but retain the IASC format of the Standard when it was adopted by the IASB. IAS 7 should be read in the context of its objective and the Basis for Conclusions, the
Preface to IFRS Accounting Standards
and the
Conceptual Framework for Financial Reporting
.
Basis of Preparation of Financial Statements
provides a basis for selecting and applying accounting policies in the absence of explicit guidance.
[
Refer:
IAS 8 paragraphs 10–12
]
International Accounting Standard 7
Statement of Cash Flows
1
Objective
Information about the
cash flows
of an entity is useful in providing users
[
Refer:
Conceptual Framework
paragraphs 1.2-1.10
and
2.36
]
of financial statements with a basis to assess the ability of the entity to generate
cash
and
cash equivalents
and the needs of the entity to utilise those cash flows. The economic decisions that are taken by users require an evaluation of the ability of an entity to generate cash and cash equivalents and the timing and certainty of their generation.
The objective of this Standard is to require the provision of information about the historical changes in cash and cash equivalents of an entity by means of a statement of cash flows which classifies cash flows during the period from
operating
,
investing
and
financing activities
.
Scope
1
An entity shall prepare a statement of cash flows in accordance with the requirements of this Standard and shall present it as an integral part of its financial statements for each period for which financial statements are presented.
2
This Standard supersedes IAS 7
Statement of Changes in Financial Position
, approved in July 1977.
3
Users of an entity’s financial statements are interested in how the entity generates and uses
cash
and
cash equivalents
. This is the case regardless of the nature of the entity’s activities and irrespective of whether cash can be viewed as the product of the entity, as may be the case with a financial institution. Entities need cash for essentially the same reasons however different their principal revenue‑producing activities might be. They need cash to conduct their operations, to pay their obligations, and to provide returns to their investors. Accordingly, this Standard requires all entities to present a statement of cash flows.
Benefits of cash flow information
4
A statement of cash flows, when used in conjunction with the rest of the financial statements, provides information that enables users to evaluate the changes in net assets of an entity, its financial structure (including its liquidity and solvency) and its ability to affect the amounts and timing of
cash flows
in order to adapt to changing circumstances and opportunities. Cash flow information is useful in assessing the ability of the entity to generate
cash
and
cash equivalents
and enables users to develop models to assess and compare the present value of the future cash flows of different entities. It also enhances the comparability
[
Refer:
Conceptual Framework
paragraphs 2.24-2.29
]
of the reporting of operating performance by different entities because it eliminates the effects of using different accounting treatments for the same transactions and events.
5
Historical cash flow information is often used as an indicator of the amount, timing and certainty of future
cash flows
. It is also useful in checking the accuracy of past assessments of future cash flows and in examining the relationship between profitability and net cash flow and the impact of changing prices.
Definitions
6
The following terms are used in this Standard with the meanings specified:
Cash
comprises cash on hand and demand deposits.
E1
Cash equivalents
are short‑term, highly liquid investments that are readily convertible to known amounts of
cash
and which are subject to an insignificant risk of changes in value.
[
Refer:
paragraphs 7 and 8
]
Cash flows
are inflows and outflows of
cash
and
cash equivalents
.
[
Refer:
paragraphs 7–9
]
Operating activities
are the principal revenue‑producing activities of the entity and other activities that are not
investing
or
financing activities
.
[
Refer:
paragraphs 13–15
]
Investing activities
are the acquisition and disposal of long‑term assets and other investments not included in
cash equivalents
and the receipt of interest and dividends as described in
paragraphs 34A–34D
.
[
Refer:
paragraph 16
]
Financing activities
are activities that result in changes in the size and composition of the contributed equity and borrowings of the entity.
[
Refer:
paragraph 17
]
E1
[IFRIC®
Update
, March 2022, Agenda Decision, ‘
Statement of Cash Flows
—Demand Deposits with Restrictions on Use arising from a Contract with a Third Party’
The Committee received a request about whether an entity includes a demand deposit as a component of cash and cash equivalents in its statements of cash flows and financial position when the demand deposit is subject to contractual restrictions on use agreed with a third party. In the fact pattern described in the request, the entity:
a.
holds a demand deposit whose terms and conditions do not prevent the entity from accessing the amounts held in it (that is, were the entity to request any amount from the deposit, it would receive that amount on demand).
b.
has a contractual obligation with a third party to keep a specified amount of cash in that separate demand deposit and to use the cash only for specified purposes. If the entity were to use the amounts held in the demand deposit for purposes other than those agreed with the third party, the entity would be in breach of its contractual obligation.
Cash and cash equivalents in the statement of cash flows
The Committee noted that the question in the request is about whether the demand deposit meets the definition of ‘cash’ in IAS 7.
Paragraph 6 of IAS 7 defines ‘cash’ by stating that it ‘comprises cash on hand and demand deposits.’ IAS 7 includes no requirements on whether an item qualifies as cash beyond the definition itself.
IAS 7 and
Presentation of Financial Statements
[now
Presentation and Disclosure in Financial Statements
] indicate that amounts included in cash and cash equivalents may be subject to restrictions, namely:
a.
paragraph 48 of IAS 7 requires an entity to disclose information about ‘significant cash and cash equivalent balances held by the entity that are not available for use by the group’; and
b.
paragraph 66(d) of IAS 1 [now paragraph 99(d) of
] requires an entity to classify as current an asset that is ‘cash or a cash equivalent (as defined in IAS 7) unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period’.
The Committee concluded that restrictions on the use of a demand deposit arising from a contract with a third party do not result in the deposit no longer being cash, unless those restrictions change the nature of the deposit in a way that it would no longer meet the definition of cash in IAS 7. In the fact pattern described in the request, the contractual restrictions on the use of the amounts held in the demand deposit do not change the nature of the deposit—the entity can access those amounts on demand. Therefore, the Committee concluded that the entity includes the demand deposit as a component of ‘cash and cash equivalents’ in its statement of cash flows.
Presentation in the statement of financial position
[Paragraph 54(i) of IAS 1 requires an entity to include a line item in its statement of financial position that presents the amount of ‘cash and cash equivalents’. Paragraph 55 of IAS 1 states ‘an entity shall present additional line items (including by disaggregating the line items listed in paragraph 54) … in the statement of financial position when such presentation is relevant to an understanding of the entity’s financial position’.
Therefore, the Committee concluded that, in the fact pattern described in the request, the entity presents the demand deposit as cash and cash equivalents in its statement of financial position. When relevant to an understanding of its financial position, the entity would disaggregate the ‘cash and cash equivalents’ line item and present the demand deposit separately in an additional line item.] [The requirements in IAS 1 referred to in these paragraphs are not all brought forward unchanged to IFRS 18. The Committee’s conclusion regarding the application of the requirements in IAS 1 might not apply to the requirements in IFRS 18.]
An entity that presents assets as current or non-current would classify the demand deposit as current applying paragraph 66(d) of IAS 1 [now paragraph 99(d) of
], unless the demand deposit is ‘restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period’.
Disclosures
Paragraph 45 of IAS 7 states that ‘an entity shall disclose the components of cash and cash equivalents…’. Applying this requirement, in the fact pattern described in the request, the entity discloses the demand deposit as a component of cash and cash equivalents. The entity also considers whether to disclose additional information:
a.
in the context of the requirements in
Financial Instruments: Disclosures
about liquidity risk arising from financial instruments and how an entity manages that risk; and
b.
if the information it provides in applying the disclosure requirements in IAS 7 and IFRS 7 is insufficient to enable users of financial statements to understand the impact of the restrictions on the entity’s financial position (paragraph 31 of IAS 1 [now paragraph 20 of
]).
The Committee concluded that the principles and requirements in IFRS Accounting Standards provide an adequate basis for an entity to determine whether to include demand deposits subject to contractual restrictions on use agreed with a third party as a component of cash and cash equivalents in its statements of cash flows and financial position. Consequently, the Committee decided not to add a standard-setting project to the work plan.]
Cash and cash equivalents
7
Cash equivalents
are held for the purpose of meeting short‑term cash commitments rather than for investment or other purposes. For an investment to qualify as a cash equivalent it must be readily convertible to a known amount of
cash
and be subject to an insignificant risk of changes in value. Therefore, an investment normally qualifies as a cash equivalent only when it has a short maturity of, say, three months or less from the date of acquisition.
E2
Equity investments are excluded from cash equivalents unless they are, in substance, cash equivalents, for example in the case of preferred shares acquired within a short period of their maturity and with a specified redemption date.
E3
E2
[IFRIC®
Update
, May 2013, Agenda Decision, ‘
Statement of Cash Flows
—identification of cash equivalents’
The Interpretations Committee received a request about the basis of classification of financial assets as cash equivalents in accordance with IAS 7. More specifically, the submitter thinks that the classification of investments as cash equivalents on the basis of the remaining period to maturity as at the balance sheet date would lead to a more consistent classification rather than the current focus on the investment’s maturity from its acquisition date.
The Interpretations Committee noted that, on the basis of paragraph 7 of IAS 7, financial assets held as cash equivalents are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes. This paragraph further states that an investment is classified as a cash equivalent, only when it has a short maturity from the date of acquisition.
The Interpretations Committee observed that paragraph 7 of IAS 7 promotes consistency between entities in the classification of cash equivalents and did not think that the requirements of paragraph 7 of IAS 7 were unclear.
On the basis of the above, the Interpretations Committee determined that in the light of the existing IFRS guidance, an interpretation or an amendment to Standards was not necessary and it did not expect significant diversity in practice to develop regarding their application. Consequently, the Interpretations Committee decided not to add this issue to its agenda.]
E3
[IFRIC®
Update
, July 2009, Agenda Decision, ‘
Statement of Cash Flows
—Determination of cash equivalents’
The IFRIC received a request for guidance on whether investments in shares or units of money market funds that are redeemable at any time can be classified as cash equivalents.
The IFRIC noted that paragraph 7 of IAS 7 states that the purpose of holding cash equivalents is to meet short-term cash commitments. In this context, the critical criteria in the definition of cash equivalents set out in paragraph 6 of IAS 7 are the requirements that cash equivalents be ‘convertible to known amounts of cash’ and ‘subject to insignificant risk of changes in value’. The IFRIC noted that the first criterion means that the amount of cash that will be received must be known at the time of the initial investment, ie the units cannot be considered cash equivalents simply because they can be converted to cash at any time at the then market price in an active market. The IFRIC also noted that an entity would have to satisfy itself that any investment was subject to an insignificant risk of changes in value for it to be classified as a cash equivalent.
Given the guidance in IAS 7, the IFRIC did not expect significant diversity in practice because the purpose of holding the instrument and the satisfaction of the criteria should both be clear from its terms and conditions. Accordingly, the IFRIC decided not to add this issue to its agenda.]
8
Bank borrowings are generally considered to be
financing activities
. However, in some countries, bank overdrafts which are repayable on demand form an integral part of an entity's cash management. In these circumstances, bank overdrafts are included as a component of
cash
and
cash equivalents
. A characteristic of such banking arrangements is that the bank balance often fluctuates from being positive to overdrawn.
E4
E4
[IFRIC®
Update
, June 2018, Agenda Decision, ‘Classification of short-term loans and credit facilities (
Statement of Cash Flows
)’
The Committee received a request asking about the types of borrowings an entity includes in its statement of cash flows as a component of cash and cash equivalents. In the fact pattern described in the request:
a.
an entity has short-term loans and credit facilities (short-term arrangements) that have a short contractual notice period (eg 14 days);
b.
the entity says it uses the short-term arrangements for cash management; and
c.
the balance of the short-term arrangements does not often fluctuate from being negative to positive.
The Committee observed that:
a.
applying paragraph 8 of IAS 7, an entity generally considers bank borrowings to be financing activities. An entity, however, includes a bank borrowing as a component of cash and cash equivalents only in the particular circumstances described in paragraph 8 of IAS 7—ie the banking arrangement is a bank overdraft that (i) is repayable on demand, and (ii) forms an integral part of the entity’s cash management.
b.
cash management includes managing cash and cash equivalents for the purpose of meeting short-term cash commitments rather than for investment or other purposes (paragraphs 7 and 9 of IAS 7). Assessing whether a banking arrangement is an integral part of an entity’s cash management is a matter of facts and circumstances.
c.
if the balance of a banking arrangement does not often fluctuate from being negative to positive, then this indicates that the arrangement does not form an integral part of the entity’s cash management and, instead, represents a form of financing.
In the fact pattern described in the request, the Committee concluded that the entity does not include the short-term arrangements as components of cash and cash equivalents. This is because these short-term arrangements are not repayable on demand. Additionally, the fact that the balance does not often fluctuate from being negative to positive indicates that the short-term arrangements are a form of financing rather than an integral part of the entity’s cash management.
The Committee also noted that paragraphs 45 and 46 of IAS 7 require an entity to (a) disclose the components of cash and cash equivalents and present a reconciliation of the amounts in its statement of cash flows with the equivalent items reported in its statement of financial position; and (b) disclose the policy which it adopts in determining the composition of cash and cash equivalents.
The Committee concluded that the principles and requirements in IFRS Standards provide an adequate basis for an entity to assess whether to include in its statement of cash flows the short-term arrangements described in the request as components of cash and cash equivalents. Consequently, the Committee decided not to add this matter to its standard-setting agenda.]
9
Cash flows
exclude movements between items that constitute
cash
or
cash equivalents
because these components are part of the cash management of an entity rather than part of its
operating
,
investing
and
financing activities
. Cash management includes the investment of excess cash in cash equivalents.
Presentation of a statement of cash flows
E5,
E6,
E7,
E8
E5
[IFRIC®
Update
, August 2005, Agenda Decision, ‘
Value added tax’
The IFRIC considered whether it should add to its agenda a project to clarify whether cash flows reported in accordance with
Cash Flow Statements
should be measured as inclusive or exclusive of value added tax (VAT). There was evidence that different practices may emerge, the differences being most marked for entities that adopt the direct method of reporting cash flows.
IAS 7 does not explicitly address the treatment of VAT. The IFRIC noted that it would be appropriate in complying with
Presentation of Financial Statements
[now
Basis of Preparation of Financial Statements
] for entities to disclose whether they present their gross cash flows as inclusive or exclusive of VAT.
The IFRIC decided that it should not develop an Interpretation on this topic, because while different practices might emerge, they were not expected to be widespread. The IFRIC will recommend to the IASB that the treatment of VAT should be considered as part of the review of IAS 7 being carried out within the project on performance reporting.]
E6
[IFRIC®
Update
, December 2020, Agenda Decision, ‘Supply Chain Financing Arrangements—Reverse Factoring’
The Committee received a request about reverse factoring arrangements. Specifically, the request asked:
a.
how an entity presents liabilities to pay for goods or services received when the related invoices are part of a reverse factoring arrangement; and
b.
what information about reverse factoring arrangements an entity is required to disclose in its financial statements.
In a reverse factoring arrangement, a financial institution agrees to pay amounts an entity owes to the entity’s suppliers and the entity agrees to pay the financial institution at the same date as, or a date later than, suppliers are paid.
...
Presentation in the statement of cash flows
Paragraph 6 of
Statement of Cash Flows
defines:
a.
operating activities as ‘the principal revenue-producing activities of the entity and other activities that are not investing or financing activities’; and
b.
financing activities as ‘activities that result in changes in the size and composition of the contributed equity and borrowings of the entity’.
An entity that has entered into a reverse factoring arrangement determines how to classify cash flows under the arrangement, typically as cash flows from operating activities or cash flows from financing activities. The Committee observed that an entity’s assessment of the nature of the liabilities that are part of the arrangement may help in determining whether the related cash flows arise from operating or financing activities. For example, if the entity considers the related liability to be a trade or other payable that is part of the working capital used in the entity’s principal revenue-producing activities, the entity presents cash outflows to settle the liability as arising from operating activities in its statement of cash flows. In contrast, if the entity considers that the related liability is not a trade or other payable because the liability represents borrowings of the entity, the entity presents cash outflows to settle the liability as arising from financing activities in its statement of cash flows.
Investing and financing transactions that do not require the use of cash or cash equivalents are excluded from an entity’s statement of cash flows (paragraph 43 of IAS 7). Consequently, if a cash inflow and cash outflow occur for an entity when an invoice is factored as part of a reverse factoring arrangement, the entity presents those cash flows in its statement of cash flows. If no cash inflow or cash outflow occurs for an entity in a financing transaction, the entity discloses the transaction elsewhere in the financial statements in a way that provides all the relevant information about the financing activity (paragraph 43 of IAS 7).
Notes to the financial statements
...
Paragraph 44A of IAS 7 requires an entity to provide ‘disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes’. The Committee noted that such disclosure is required for liabilities that are part of a reverse factoring arrangement if the cash flows for those liabilities were, or future cash flows will be, classified as cash flows from financing activities.
The Committee concluded that the principles and requirements in IFRS Standards provide an adequate basis for an entity to determine the presentation of liabilities that are part of reverse factoring arrangements, the presentation of the related cash flows, and the information to disclose in the notes about, for example, liquidity risks that arise in such arrangements. Consequently, the Committee decided not to add a standard-setting project on these matters to the work plan.]
E7
[IFRIC®
Update
, March 2008, Agenda Decision, ‘
Statement of Cash Flows
—Classification of expenditures’
The IFRIC received a request for guidance on the treatment of some types of expenditure in the statement of cash flows. In practice some entities classify expenditures that are not recognised as assets under IFRSs as cash flows from operating activities while others classify them as part of investing activities. Examples of such expenditures are those for exploration and evaluation activities (which can be recognised, according to the applicable standard, as an asset or an expense). Advertising and promotional activities, staff training and research and development could also raise the same issue.
The IFRIC concluded that the issue could be best resolved by referring it to the Board with a recommendation that IAS 7 should be amended to make explicit that only an expenditure that results in a recognised asset can be classified as a cash flow from investing activity. The IFRIC therefore decided not to add the issue to its agenda.]
E8
[IFRIC®
Update
, November 2024, Agenda Decision, ‘
Statement of Cash Flows
—Classification of Cash Flows related to Variation Margin Calls on 'Collateralised-to-Market' Contracts’
The Committee received a request about how an entity presents, in its statement of cash flows, the cash flows related to variation margin call payments made on contracts to purchase or sell commodities at a predetermined price and at a specified time in the future.
Fact pattern
The request describes a contract to purchase or sell commodities at a predetermined price and at a specified time in the future. An entity may enter into such a contract for different purposes and applies the relevant requirements in IFRS Accounting Standards accordingly. For example, the entity may use such a contract:
a.
to receive commodities in accordance with its expected usage requirements;
b.
to hedge against fluctuations in the prices of commodities; or
c.
for trading purposes.
Such a contract typically has a maturity of up to three years, can be settled physically or net in cash and is both:
a.
centrally cleared
—that is, after a new contract is entered into, for the purpose of settlement via a central counterparty, the contract is novated by each counterparty to the central counterparty.
b.
collateralised-to-market
—that is, during the life of the contract, the counterparties make or receive daily payments based on the fluctuations of the fair value of the contract (variation margin call payments). These variation margin call payments represent a transfer of cash collateral (hence the contract is ‘collateralised to market’), rather than a partial settlement of the contract (as in ‘settled-to-market’ contracts).
The request asked how an entity presents, in its statement of cash flows, the cash flows related to variation margin call payments made on such a contract.
Conclusion
Evidence gathered by the Committee did not indicate that the matter described in the request is widespread. Based on its findings, the Committee concluded that the matter described in the request does not have widespread effect. Consequently, the Committee decided not to add a standard-setting project to the work plan.]
10
The statement of cash flows shall report
cash flows
during the period classified by
operating
,
investing
and
financing activities
. In preparing the statement of cash flows, an entity shall apply this Standard and also apply the general requirements for financial statements in
paragraphs 9–43
and
113–114 of
Presentation and Disclosure in Financial Statements
.
11
An entity presents its
cash flows
from
operating
,
investing
and
financing activities
in a manner which is most appropriate to its business. Classification by activity provides information that allows users
[
Refer:
Conceptual Framework
paragraphs 1.2-1.10
and
2.36
]
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 may also be used to evaluate the relationships among those activities.
12
A single transaction may include
cash flows
that are classified differently.
Operating activities
13
The amount of
cash flows
arising from
operating activities
is a key indicator of the extent to which the operations of the entity have generated sufficient cash flows to repay loans, maintain the operating capability of the entity, pay dividends and make new investments without recourse to external sources of financing. Information about the specific components of historical operating cash flows is useful, in conjunction with other information, in forecasting future operating cash flows.
14
Cash flows
from
operating activities
are primarily derived from the principal revenue‑producing activities of the entity. Therefore, they generally result from the transactions and other events that enter into the determination of profit or loss. Examples of cash flows from operating activities are:
(a)
cash receipts from the sale of goods and the rendering of services;
(b)
cash receipts from royalties, fees, commissions and other revenue;
(c)
cash payments to suppliers for goods and services;
(d)
cash payments to and on behalf of employees;
(e)
[deleted]
(f)
cash payments or refunds of income taxes unless they can be specifically identified with
financing
and
investing activities
;
(g)
cash receipts and payments from contracts held for dealing or trading purposes; and
(h)
cash receipts of dividends and cash receipts and payments of interest as described in
paragraphs 34B–34D
.
Some transactions, such as the sale of an item of plant, may give rise to a gain or loss 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 manufacture or acquire assets held for rental to others and subsequently held for sale as described in
paragraph 68A of
Property, Plant and Equipment
are
cash flows
from
operating activities
. The cash receipts from rents and subsequent sales of such assets are also cash flows from operating activities.
[
Refer:
IAS 16 Basis for Conclusions paragraphs BC35A–BC35F
]
15
An entity may hold securities and loans for dealing or trading purposes, in which case they are similar to inventory acquired specifically for resale. Therefore,
cash flows
arising from the purchase and sale of dealing or trading securities are classified as
operating activities
. Similarly, cash advances and loans made by financial institutions
[
Refer:
Illustrative Examples, example B
]
are usually classified as operating activities since they relate to the main revenue‑producing activity of that entity.
Investing activities
16
The separate presentation of
cash flows
arising from
investing activities
is 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 recognised asset in the statement of financial position are eligible for classification as investing activities.
[
Refer:
Basis for Conclusions paragraphs BC3–BC8
and
IFRS 6 Basis for Conclusions paragraphs BC23A and BC23B
]
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 development costs
[
Refer:
IAS 38 paragraphs 57–67
]
and self‑constructed property, plant and equipment.
[
Refer:
IAS 16 paragraph 22
]
(b)
cash receipts from sales of property, plant and equipment, intangibles and other long‑term assets.
(c)
cash payments to acquire equity or debt instruments of other entities including interests in associates and joint ventures (other than payments for those instruments considered to be
cash equivalents
or those held for dealing or trading purposes).
(d)
cash receipts from sales of equity or debt instruments of other entities including interests in associates and joint ventures (other than receipts for those instruments considered to be
cash equivalents
and those held for dealing or trading purposes).
(e)
cash advances and loans made to other parties (other than advances and loans made by a financial institution
[
Refer:
Illustrative Examples, example B
]
).
(f)
cash receipts from the repayment of advances and loans made to other parties (other than advances and loans of a financial institution).
(g)
cash payments for futures contracts, forward contracts, option contracts and swap contracts except when the contracts are held for dealing or trading purposes, or the payments are classified as
financing activities
.
(h)
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.
(i)
cash receipts of interest and dividends as described in
paragraphs 34A–34D
.
When a contract is accounted for as a hedge 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.
Financing activities
17
The separate presentation 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)
cash proceeds from issuing shares or other equity instruments;
(b)
cash payments to owners to acquire or redeem the entity’s shares;
(c)
cash proceeds from issuing debentures, loans, notes, bonds, mortgages and other short-term or long‑term borrowings;
(d)
cash repayments of amounts borrowed;
(e)
cash payments by a lessee for the reduction of the outstanding liability relating to a lease;
(f)
cash payments of dividends as described in
paragraph 33A
; and
(g)
cash payments of interest as described in
paragraphs 34A–34D
.
Reporting cash flows from operating activities
18
An entity shall report
cash flows
from
operating activities
using either:
(a)
the direct method,
[
Refer:
paragraph 19
and
Illustrative Examples, example A
]
whereby major classes of gross cash receipts and gross cash payments are disclosed; or
(b)
the indirect method,
[
Refer:
paragraph 20
and
Illustrative Examples, example A
]
whereby operating profit or loss is adjusted for:
(i)
the effects of transactions of a non‑cash nature;
(ii)
any deferrals or accruals of past or future operating cash receipts or payments;
(iii)
income or expenses classified in the operating category in the statement of profit or loss for which the associated cash flows are classified as cash flows from either investing or financing activities; and
(iv)
cash flows from operating activities for which the associated income or expenses are not classified in the operating category of the statement of profit or loss.
[
Refer:
Basis for Conclusions paragraphs BC45–BC47
]
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 available under the indirect method.
[
Refer:
paragraph 20
]
Under the direct method, information about major classes of gross cash receipts and gross cash payments may be obtained either:
(a)
from the accounting records of the entity; or
(b)
by adjusting sales, cost of sales (interest and similar income and interest expense and similar charges for a financial institution) and other items in the statement of comprehensive income for:
(i)
changes during the period in inventories and
operating
receivables and payables;
(ii)
other non‑cash items; and
(iii)
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 determined by adjusting operating profit or loss for the effects of:
(a)
changes during the period in inventories and operating receivables and payables;
(b)
non‑cash items such as depreciation, provisions and unrealised foreign currency gains and losses classified in the operating category;
(c)
income or expenses classified in the operating category in the statement of profit or loss for which the cash effects are
investing
or
financing
cash flows
; and
(d)
operating cash flows, such as income tax (in accordance with
paragraph 35
), for which the corresponding income or expenses are not classified in the operating category in the statement of profit or loss.
Alternatively, the net cash flow from operating activities may be presented under the indirect method by showing the revenues and expenses classified in the operating category in the statement of profit or loss, the changes during the period in inventories and operating receivables and payables and any other operating cash flows for which the corresponding income or expenses are not classified in the operating category.
Reporting cash flows from investing and financing activities
21
An entity shall report separately 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 reported on a net basis.
[
Refer:
Illustrative Examples, example A
]
Reporting cash flows on a net basis
22
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
(b)
cash receipts and payments for items in which the turnover is quick, the amounts are large, and the maturities are short.
23
Examples of cash receipts and payments referred to in
paragraph 22(a)
are:
(a)
the acceptance and repayment of demand deposits of a bank;
(b)
funds held for customers by an investment entity; and
(c)
rents collected on behalf of, and paid over to, the owners of properties.
23A
Examples of cash receipts and payments referred to in
paragraph 22(b)
are advances made for, and the repayment of:
(a)
principal amounts relating to credit card customers;
(b)
the purchase and sale of investments; and
(c)
other short‑term borrowings, for example, those which have a maturity period of three months or less.
24
Cash flows
arising from each of the following activities of a financial institution may be reported on a net basis:
[
Refer:
Illustrative Examples, example B
]
(a)
cash receipts and payments for the acceptance and repayment of deposits with a fixed maturity date;
(b)
the placement of deposits with and withdrawal of deposits from other financial institutions; and
(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 foreign currency shall be recorded in an entity’s functional currency by applying to the foreign currency amount the exchange rate between the functional currency and the foreign currency at the date of the cash flow.
26
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.
27
Cash flows
denominated in a foreign currency are reported in a manner consistent with
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 translation of the cash flows of a foreign subsidiary. However,
does not permit use of the exchange rate at the end of the reporting period when translating the cash flows of a foreign subsidiary.
28
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 beginning and the end of the period. This amount is presented separately 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.
29
[Deleted]
30
[Deleted]
Interest and dividends
[
Refer:
Illustrative Examples, examples A
and
B
Basis for Conclusions paragraphs BC48–BC60
]
31
Cash flows
from interest and dividends received and paid shall each be presented separately. Each shall be classified in a consistent manner from period to period applying
paragraphs 32
,
33A
and
34A–34D
.
32
The total amount of interest paid during a period is included in the statement of cash flows whether it has been recognised as an expense in profit or loss or capitalised in accordance with
Borrowing Costs
.
33
[Deleted]
33A
An entity shall classify dividends paid as cash flows from financing activities.
34
[Deleted]
34A
An entity, other than those entities described in
paragraph 34B
, shall classify:
(a)
interest paid (as described in
paragraph 32
) as cash flows from financing activities.
(b)
interest and dividends received as cash flows from investing activities.
34B
An entity that invests in assets or provides financing to customers as a main business activity (as determined applying
paragraphs B30–B41 of
) shall determine how to classify dividends received, interest received and interest paid in the statement of cash flows by referring to how—applying
—it classifies dividend income, interest income and interest expenses in the statement of profit or loss. An entity shall classify the total of each of these cash flows in a single category in the statement of cash flows (that is, either as operating, investing or financing activities).
34C
In applying
paragraph 34B
, if an entity classifies the total of each of dividend income, interest income and interest expenses in a single category of the statement of profit or loss, the entity shall classify the total of each of dividends received, interest received and interest paid as cash flows arising from the associated activity in the statement of cash flows. For example, if an entity classifies all its interest expenses in the financing category of the statement of profit or loss, the entity would classify all its interest paid as cash flows from financing activities.
34D
In applying
, an entity may be required to classify each of dividend income, interest income and interest expenses in more than one category of the statement of profit or loss. In such a case, in applying
paragraph 34B
the entity shall make an accounting policy choice to classify the related cash flows in one of the associated activities in the statement of cash flows. For example, if an entity classifies interest expenses in the operating category and the financing category of the statement of profit or loss, the entity would classify all its interest paid in accordance with its accounting policy as either cash flows from operating activities or cash flows from financing activities.
Taxes on income
[
Refer:
Illustrative Examples, examples A
and
B
]
35
Cash flows
arising from taxes on income shall be separately presented 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 arise 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 identify 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 individual transaction that gives rise to cash flows that are 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 more than one class of activity, the total amount of taxes paid is disclosed.
Investments in subsidiaries, associates and joint ventures
37
When accounting for an investment in an associate, a joint venture or a subsidiary accounted for by use of the equity method or at cost, 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.
[
Refer:
Basis for Conclusions paragraph BC8A
]
38
An entity that reports its interest in an associate or a joint venture using the equity method includes in its statement of cash flows the cash flows in respect of its investments in the associate or joint venture, and distributions and other payments or receipts between it and the associate or joint venture.
Changes in ownership interests in subsidiaries and other businesses
[
Refer:
Illustrative Examples, examples A
and
B
]
39
The aggregate
cash flows
arising from obtaining or losing control of subsidiaries or other businesses shall be presented separately and classified as
investing activities
.
40
An entity shall disclose, in aggregate, in respect of both obtaining and losing control of subsidiaries or other businesses during the period each of the following:
(a)
the total consideration paid or received;
(b)
the portion of the consideration consisting of
cash
and
cash equivalents
;
(c)
the amount of cash and cash equivalents in the subsidiaries or other businesses over which control is obtained or lost; and
(d)
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 major category.
40A
An investment entity, as defined in
Consolidated Financial Statements
, need not apply
paragraphs 40(c) or 40(d)
to an investment in a subsidiary that is required to be measured at fair value through profit or loss.
41
The separate presentation 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 disposed of, helps to distinguish 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.
42
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.
42A
Cash flows arising from changes in ownership interests in a subsidiary that do not result in a loss of control shall be classified as cash flows from financing activities, unless the subsidiary is held by an investment entity, as defined in
, and is required to be measured at fair value through profit or loss.
42B
Changes in ownership interests in a subsidiary that do not result in a loss of control, such as the subsequent purchase or sale by a parent of a subsidiary’s equity instruments, are accounted for as equity transactions (see
), unless the subsidiary is held by an investment entity and is required to be measured at fair value through profit or loss.
[
Refer:
IFRS 10 paragraph 23
]
Accordingly, the resulting cash flows are classified in the same way as other transactions with owners described in
paragraph 17
.
Non-cash transactions
[
Refer:
Illustrative Examples, example A note B
]
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
.
44
Many
investing
and
financing activities
do not have a direct impact on current
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 with 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)
the acquisition of assets either by assuming directly related liabilities or by means of a lease;
(b)
the acquisition of an entity by means of an equity issue; and
(c)
the conversion of debt to equity.
Changes in liabilities arising from financing activities
[
Refer:
Illustrative Examples, example A note E
and
example C
]
44A
An entity shall provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from
financing activities
, including both changes arising from
cash flows
and non-cash changes.
E9
[
Refer:
Basis for Conclusions paragraphs BC9–BC10
and
BC15–BC16
]
[
Note:
See
December 2020 Agenda Decision, ‘Supply Chain Financing Arrangements—Reverse Factoring’ which is reproduced before paragraph 10
.]
E9
[IFRIC®
Update
, September 2019, Agenda Decision, ‘
Statement of Cash Flows
—Disclosure of Changes in Liabilities Arising from Financing Activities’
The Committee received a request from users of financial statements (investors) about the disclosure requirements in IAS 7 that relate to changes in liabilities arising from financing activities. Specifically, investors asked whether the disclosure requirements in paragraphs 44B–44E of IAS 7 are adequate to require an entity to provide disclosures that meet the objective in paragraph 44A of IAS 7.
Meeting the disclosure objective (Paragraph 44A of IAS 7)
Paragraph 44A of IAS 7 requires an entity to provide ‘disclosures that enable [investors] to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes’.
To the extent necessary to satisfy the objective in paragraph 44A, paragraph 44B specifies that an entity discloses the following changes in liabilities arising from financing activities:
a.
changes from financing cash flows;
b.
changes arising from obtaining or losing control of subsidiaries or other businesses;
c.
the effect of changes in foreign exchange rates;
d.
changes in fair values; and
e.
other changes.
The Board explained in paragraph BC16 that it developed the disclosure objective in paragraph 44A to reflect the needs of investors, including those summarised in paragraph BC10. The Board also noted in paragraph BC18 that when considering whether it has fulfilled the objective in paragraph 44A, an entity takes into consideration the extent to which information about changes in liabilities arising from financing activities provides relevant information to investors, considering the needs of investors summarised in paragraph BC10. These investor needs are:
a.
to check their understanding of the entity’s cash flows and use that understanding to improve their confidence in forecasting the entity’s future cash flows;
b.
to provide information about the entity’s sources of finance and how those sources have been used over time; and
c.
to help them understand the entity’s exposure to risks associated with financing.
Reconciling between the opening and closing balances of liabilities arising from financing activities
Paragraph 44D of IAS 7 states that ‘one way to fulfil the disclosure requirement in paragraph 44A is by providing a reconciliation between the opening and closing balances in the statement of financial position for liabilities arising from financing activities, including the changes identified in paragraph 44B’.
When an entity discloses such a reconciliation it provides information that enables investors to link items included in the reconciliation to other areas of the financial statements. In doing this, an entity applies:
a.
paragraph 44C to identify liabilities arising from financing activities and use them as the basis of the reconciliation. Paragraph 44C defines these liabilities as ‘liabilities for which cash flows were, or future cash flows will be, classified in the statement of cash flows as cash flows from financing activities’. If an entity also chooses to define, and reconcile, a different ‘net debt’ measure, this does not remove the requirement for the entity to identify its liabilities arising from financing activities as defined in paragraph 44C.
b.
paragraph 44E to disclose changes in liabilities arising from financing activities separately from changes in any other assets and liabilities.
c.
paragraph 44D to provide sufficient information to enable investors to link the items included in the reconciliation to amounts reported in the statement of financial position and the statement of cash flows, or related notes. An entity develops disclosures that enable investors to link (i) the opening and closing balances of the liabilities arising from financing activities reported in the reconciliation, to (ii) amounts reported in the entity’s statement of financial position (or related notes) regarding those liabilities.
[The Committee observed that an entity applies judgement in determining the extent to which it disaggregates and explains the changes in liabilities arising from financing activities included in the reconciliation to meet the objective in paragraph 44A. In this respect, the Committee noted the following:
a.
in disaggregating liabilities arising from financing activities, and cash and non-cash changes in those liabilities, an entity applies paragraph 44B of IAS 7 and paragraph 30A of
Presentation of Financial Statements
. Paragraph 30A of IAS 1 states that an entity ‘shall not reduce the understandability of its financial statements…by aggregating material items that have different natures or functions’. Accordingly, an entity discloses any individually material items separately in the reconciliation. Such items include material classes of liability (or asset) arising from financing activities and material reconciling items (ie cash or non-cash changes).
b.
in explaining liabilities arising from financing activities, and cash and non-cash changes in those liabilities, an entity applies paragraph 44B of IAS 7 and paragraph 112(c) of IAS 1. Paragraph 112(c) of IAS 1 requires an entity to disclose ‘information that is not presented elsewhere in the financial statements, but is relevant to an understanding of any of them’. Accordingly, applying paragraphs 44A–44E, an entity determines the appropriate structure for its reconciliation including the appropriate level of disaggregation. Thereafter, the entity determines whether additional explanation is needed to meet the disclosure objective in paragraph 44A. An entity would explain each class of liability (or asset) arising from financing activities included in the reconciliation and each reconciling item in a way that (i) provides information about its sources of finance, (ii) enables investors to check their understanding of the entity’s cash flows, and (iii) enables investors to link items to the statement of financial position and the statement of cash flows, or related notes.] [The requirements in IAS 1 referred to in these paragraphs are not all brought forward unchanged to
Presentation and Disclosure in Financial Statements
. The Committee’s conclusion regarding the application of the requirements in IAS 1 might not apply to the requirements in IFRS 18.]
Accordingly, the Committee concluded that the principles and requirements in IFRS Standards provide an adequate basis for an entity to disclose information about changes in liabilities arising from financing activities that enables investors to evaluate those changes. Accordingly, the Committee concluded that the disclosure requirements in paragraphs 44B–44E of IAS 7, together with requirements in IAS 1 [now
], are adequate to require an entity to provide disclosures that meet the objective in paragraph 44A of IAS 7. Consequently, the Committee decided not to add the matter to its standard-setting agenda.]
44B
To the extent necessary to satisfy the requirement in paragraph 44A, an entity shall disclose the following changes in liabilities arising from
financing activities
:
(a)
changes from financing
cash flows
;
(b)
changes arising from obtaining or losing control of subsidiaries or other businesses;
(c)
the effect of changes in foreign exchange rates;
(d)
changes in fair values; and
(e)
other changes.
[
Refer:
Basis for Conclusions paragraphs BC11–BC13
]
44C
Liabilities arising from
financing activities
are liabilities for which
cash flows
were, or future cash flows will be, classified in the statement of cash flows as cash flows from financing activities. In addition, the disclosure requirement in paragraph 44A also applies to changes in financial assets (for example, assets that hedge liabilities arising from financing activities) if cash flows from those financial assets were, or future cash flows will be, included in cash flows from financing activities.
[
Refer:
Basis for Conclusions paragraph BC22
]
44D
One way to fulfil the disclosure requirement in paragraph 44A is by providing a reconciliation between the opening and closing balances in the statement of financial position for liabilities arising from
financing activities
, including the changes identified in paragraph 44B.
[
Refer:
Basis for Conclusions paragraphs BC17–BC19
]
Where an entity discloses such a reconciliation, it shall provide sufficient information to enable users of the financial statements to link items included in the reconciliation to the statement of financial position and the statement of cash flows.
44E
If an entity provides the disclosure required by paragraph 44A in combination with disclosures of changes in other assets and liabilities, it shall disclose the changes in liabilities arising from
financing activities
separately from changes in those other assets and liabilities.
[
Refer:
Basis for Conclusions paragraphs BC20–BC21
]
Supplier finance arrangements
44F
An entity shall disclose information about its supplier finance arrangements (as described in
paragraph 44G
) that enables users of financial statements to assess the effects of those arrangements on the entity’s liabilities and
cash flows
and on the entity’s exposure to
liquidity risk
[
Refer:
IFRS 7 paragraph B11F(j)
]
.
[
Refer:
Basis for Conclusions paragraphs BC28–BC30
]
44G
Supplier finance arrangements are characterised by one or more finance providers offering to pay amounts an entity owes its suppliers and the entity agreeing to pay according to the terms and conditions of the arrangements at the same date as, or a date later than, suppliers are paid. These arrangements provide the entity with extended payment terms, or the entity’s suppliers with early payment terms, compared to the related invoice payment due date. Supplier finance arrangements are often referred to as supply chain finance, payables finance or reverse factoring arrangements. Arrangements that are solely credit enhancements for the entity (for example, financial guarantees including letters of credit used as guarantees) or instruments used by the entity to settle directly with a supplier the amounts owed (for example, credit cards) are not supplier finance arrangements.
[
Refer:
Basis for Conclusions paragraphs BC31–BC33
]
44H
To meet the objectives in
paragraph 44F
, an entity shall disclose in aggregate for its supplier finance arrangements:
(a)
the terms and conditions of the arrangements (for example, extended payment terms and security or guarantees provided). However, an entity shall disclose separately the terms and conditions of arrangements that have dissimilar terms and conditions.
(b)
as at the beginning and end of the reporting period:
(i)
the carrying amounts, and associated line items presented in the entity’s statement of financial position, of the
financial liabilities
that are part of a supplier finance arrangement.
(ii)
the carrying amounts, and associated line items, of the financial liabilities disclosed under (i) for which suppliers have already received payment from the finance providers.
(iii)
the range of payment due dates (for example, 30–40 days after the invoice date) for both the financial liabilities disclosed under (i) and comparable trade payables that are not part of a supplier finance arrangement. Comparable trade payables are, for example, trade payables of the entity within the same line of business or jurisdiction as the financial liabilities disclosed under (i). If ranges of payment due dates are wide, an entity shall disclose explanatory information about those ranges or disclose additional ranges (for example, stratified ranges).
(c)
the type and effect of non-cash changes in the carrying amounts of the financial liabilities disclosed under (b)(i). Examples of non-cash changes include the effect of
business combinations
,
exchange differences
exchange difference
or other transactions that do not require the use of
cash
cash
or
cash equivalents
cash equivalents
(see
paragraph 43
).
[
Refer:
Basis for Conclusions paragraphs BC34–BC39
]
Components of cash and cash equivalents
[
Refer:
Illustrative Examples, example A note C
]
45
An entity shall disclose the components of
cash
and
cash equivalents
and shall present a reconciliation 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 variety of cash management practices and banking arrangements around the world and in order to comply with
Basis of Preparation of Financial Statements
, an entity discloses the policy which it adopts in determining the composition of
cash
and
cash equivalents
.
47
The effect of any change in the policy for determining components of
cash
and
cash equivalents
, for example, a change in the classification of financial instruments previously considered to be part of an entity’s investment portfolio, is reported in accordance with
.
Other disclosures
48
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.
[
Refer:
Illustrative Examples, example A note C
]
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 country where exchange controls or other legal restrictions apply when the balances are not available for general use by the parent or other subsidiaries.
50
Additional information may be relevant to users
[
Refer:
Conceptual Framework
paragraphs 1.2-1.10
and
2.36
]
in understanding the financial position and liquidity of an entity. Disclosure of this information, 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 settle capital commitments, indicating any restrictions on the use of these facilities;
(b)
[deleted]
(c)
the aggregate amount of cash flows that represent increases in operating capacity separately from those cash flows that are required to maintain operating capacity; and
(d)
the amount of the cash flows arising from the operating, investing and financing activities of each reportable segment
[
Refer:
IFRS 8 paragraph 11
]
(see
Operating Segments
).
51
The 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 sake of current liquidity and distributions to owners.
52
The disclosure of segmental
cash flows
enables users
[
Refer:
Conceptual Framework
paragraphs 1.2-1.10
and
2.36
]
to obtain a better understanding of the relationship between the cash flows of the business as a whole and those of its component parts and the availability and variability of segmental cash flows.
[
Refer:
Illustrative Examples, example A note D
]
Effective date and transition
53
This Standard becomes operative for financial statements covering periods beginning on or after 1 January 1994.
54
(as amended in 2008) amended
paragraphs 39–42
and added
paragraphs 42A and 42B
. An entity shall apply those amendments for annual periods beginning on or after 1 July 2009. If an entity applies
(amended 2008) for an earlier period, the amendments shall be applied for that earlier period. The amendments shall be applied retrospectively.
55
Paragraph 14
was amended by
Improvements to IFRSs
issued in May 2008. An entity shall apply that amendment for annual 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
.
56
Paragraph 16
was amended by
Improvements to IFRSs
issued in April 2009. An entity shall apply that amendment for annual periods beginning on or after 1 January 2010. Earlier application is permitted. If an entity applies the amendment for an earlier period it shall disclose that fact.
57
and
Joint Arrangements
, issued in May 2011, amended
paragraphs 37
,
38
and
42B
and deleted paragraph 50(b). An entity shall apply those amendments when it applies
and
.
58
Investment Entities
(Amendments to
,
and
), issued in October 2012, amended
paragraphs 42A and 42B
and added
paragraph 40A
. An entity shall apply those amendments for annual periods beginning on or after 1 January 2014. Earlier application of
Investment Entities
is permitted. If an entity applies those amendments earlier it shall also apply all amendments included in
Investment Entities
at the same time.
59
Leases
, issued in January 2016, amended paragraphs 17 and 44. An entity shall apply those amendments when it applies IFRS 16.
60
Disclosure Initiative
(Amendments to IAS 7), issued in January 2016, added paragraphs 44A–44E. An entity shall apply those amendments for annual periods beginning on or after 1 January 2017.
[
Refer:
Basis for Conclusions paragraph BC26
]
Earlier application is permitted. When the entity first applies those amendments, it is not required to provide comparative information for preceding periods.
[
Refer:
Basis for Conclusions paragraph BC27
]
61
Insurance Contracts
, issued in May 2017, amended paragraph 14. An entity shall apply that amendment when it applies IFRS 17.
62
Supplier Finance Arrangements
, issued in May 2023, added
paragraphs 44F–44H
. An entity shall apply those amendments for annual reporting periods beginning on or after 1 January 2024. Earlier application is permitted. If an entity applies those amendments for an earlier period, it shall disclose that fact.
63
In applying
Supplier Finance Arrangements
, an entity is not required to disclose:
(a)
comparative information for any reporting periods presented before the beginning of the annual reporting period in which the entity first applies those amendments.
(b)
the information otherwise required by
paragraph 44H(b)(ii)–(iii)
as at the beginning of the annual reporting period in which the entity first applies those amendments.
(c)
the information otherwise required by
paragraphs 44F–44H
for any interim period presented within the annual reporting period in which the entity first applies those amendments.
[
Refer:
Basis for Conclusions paragraphs BC40–BC44
]
64
issued in April 2024 amended
paragraphs 6
,
10
,
12
,
14
,
16–18
,
20
,
31
,
32
,
35
,
46
and
47
, added
paragraphs 33A
and
34A–34D
, and deleted
paragraphs 33
and
34
. An entity shall apply those amendments when it applies
.
65
Annual Improvements to IFRS Accounting Standards—Volume 11
, issued in July 2024, amended
paragraph 37
. An entity shall apply that amendment for annual reporting periods beginning on or after 1 January 2026. Earlier application is permitted. If an entity applies that amendment for an earlier period, it shall disclose that fact.
Board Approvals
Approval by the Board of
Disclosure Initiative
(Amendments to IAS 7) issued in January 2016
Disclosure Initiative
(Amendments to IAS 7) was approved for issue by thirteen of the fourteen members of the International Accounting Standards Board. Mr Ochi dissented. His dissenting opinion is set out after the Basis for Conclusions.
Hans Hoogervorst
Chairman
Ian Mackintosh
Vice-Chairman
Stephen Cooper
Philippe Danjou
Martin Edelmann
Patrick Finnegan
Amaro Gomes
Gary Kabureck
Suzanne Lloyd
Takatsugu Ochi
Darrel Scott
Chungwoo Suh
Mary Tokar
Wei-Guo Zhang
Approval by the IASB of
Supplier Finance Arrangements
issued in May 2023
Supplier Finance Arrangements
, which amended IAS 7
Statement of Cash Flows
and IFRS 7
Financial Instruments: Disclosures
, was approved for issue by 12 of 14 members of the International Accounting Standards Board (IASB). Mr Esterer and Ms Keren abstained from voting in view of their recent appointment to the IASB.
Andreas Barckow
Chair
Linda Mezon-Hutter
Vice-Chair
Nick Anderson
Patrina Buchanan
Tadeu Cendon
Florian Esterer
Zach Gast
Hagit Keren
Jianqiao Lu
Bruce Mackenzie
Bertrand Perrin
Rika Suzuki
Ann Tarca
Robert Uhl
Footnotes
1
In September 2007 the IASB amended the title of IAS 7 from
Cash Flow Statements
to
Statement of Cash Flows
as a consequence of the revision of
Presentation of Financial Statements
in 2007. In April 2024 the IASB issued
Presentation and Disclosure in Financial Statements
and carried over these requirements in
to
.
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