Illustrative examples
These illustrative examples accompany, but are not part of, AASB 107.
A Statement of cash flows for an entity other than a financial institution
1
The examples show only current period amounts. Corresponding amounts for the preceding period are required to be presented in accordance with AASB 101 Presentation of Financial Statements.
2
Information from the statement of comprehensive income and statement of financial position is provided to show how the statements of cash flows under the direct method and indirect method have been derived. Neither the statement of comprehensive income nor the statement of financial position is presented in conformity with the disclosure and presentation requirements of other Standards.
3
The following additional information is also relevant for the preparation of the statements of cash flows:
• all of the shares of a subsidiary were acquired for 590. The fair values of assets acquired and liabilities assumed were as follows:
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Inventories |
100 |
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Accounts receivable |
100 |
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Cash |
40 |
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Property, plant and equipment |
650 |
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Trade payables |
100 |
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Long-term debt |
200 |
• 250 was raised from the issue of share capital and a further 250 was raised from long-term borrowings.
• interest expense was 400, of which 170 was paid during the period. Also, 100 relating to interest expense of the prior period was paid during the period.
• dividends paid were 1,200.
• the liability for tax at the beginning and end of the period was 1,000 and 400 respectively. During the period, a further 200 tax was provided for. Withholding tax on dividends received amounted to 100.
• during the period, the group acquired property, plant and equipment and right-of-use assets relating to property, plant and equipment with an aggregate cost of 1,250, of which 900 related to right-of-use assets. Cash payments of 350 were made to purchase property, plant and equipment.
• plant with original cost of 80 and accumulated depreciation of 60 was sold for 20.
• accounts receivable as at the end of 20X2 include 100 of interest receivable.
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Consolidated statement of comprehensive income for the period ended 20X2(a) |
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|
Sales |
30,650 |
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Cost of sales |
(26,000) |
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Gross profit |
4,650 |
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Depreciation |
(450) |
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Administrative and selling expenses |
(910) |
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Interest expense |
(400) |
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Investment income |
500 |
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Foreign exchange loss |
(40) |
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Profit before taxation |
3,350 |
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Taxes on income |
(300) |
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Profit |
3,050 |
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(a) The entity did not recognise any components of other comprehensive income in the period ended 20X2 |
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Consolidated statement of financial position as at end of 20X2 |
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20X2 |
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20X1 |
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Assets |
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Cash and cash equivalents |
|
|
230 |
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|
160 |
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Accounts receivable |
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|
1,900 |
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|
1,200 |
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Inventory |
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|
1,000 |
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|
1,950 |
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Portfolio investments |
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|
2,500 |
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|
2,500 |
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Property, plant and equipment at cost |
3,730 |
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|
1,910 |
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Accumulated depreciation |
(1,450) |
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|
(1,060) |
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Property, plant and equipment net |
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|
2,280 |
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|
850 |
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Total assets |
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|
7,910 |
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|
6,660 |
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Liabilities |
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Trade payables |
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|
250 |
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|
1,890 |
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Interest payable |
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|
230 |
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|
100 |
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Income taxes payable |
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|
400 |
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|
1,000 |
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Long-term debt |
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|
2,300 |
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|
1,040 |
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Total liabilities |
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|
3,180 |
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|
4,030 |
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Shareholders’ equity |
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Share capital |
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1,500 |
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|
1,250 |
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Retained earnings |
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3,230 |
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|
1,380 |
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Total shareholders’ equity |
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|
4,730 |
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|
2,630 |
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Total liabilities and shareholders’ equity |
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|
7,910 |
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|
6,660 |
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Direct method statement of cash flows (paragraph 18(a)) |
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20X2 |
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Cash flows from operating activities |
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Cash receipts from customers |
30,150 |
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Cash paid to suppliers and employees |
(27,600) |
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Cash generated from operations |
2,550 |
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Interest paid |
(270) |
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Income taxes paid |
(900) |
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Net cash from operating activities |
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|
1,380 |
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Cash flows from investing activities |
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Acquisition of subsidiary X, net of cash acquired (Note A) |
(550) |
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Purchase of property, plant and equipment (Note B) |
(350) |
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Proceeds from sale of equipment |
20 |
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Interest received |
200 |
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Dividends received |
200 |
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Net cash used in investing activities |
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(480) |
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Cash flows from financing activities |
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Proceeds from issue of share capital |
250 |
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Proceeds from long-term borrowings |
250 |
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Payment of lease liabilities |
(90) |
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Dividends paid(a) |
(1,200) |
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Net cash used in financing activities |
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(790) |
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Net increase in cash and cash equivalents |
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|
110 |
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Cash and cash equivalents at beginning of period (Note C) |
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|
120 |
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Cash and cash equivalents at end of period (Note C) |
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|
230 |
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(a) This could also be shown as an operating cash flow. |
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Indirect method statement of cash flows (paragraph 18(b)) |
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20X2 |
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Cash flows from operating activities |
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Profit before taxation |
3,350 |
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Adjustments for: |
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Depreciation |
450 |
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Foreign exchange loss |
40 |
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Investment income |
(500) |
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Interest expense |
400 |
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|
3,740 |
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Increase in trade and other receivables |
(500) |
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Decrease in inventories |
1,050 |
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Decrease in trade payables |
(1,740) |
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Cash generated from operations |
2,550 |
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Interest paid |
(270) |
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Income taxes paid |
(900) |
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Net cash from operating activities |
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|
1,380 |
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Cash flows from investing activities |
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Acquisition of subsidiary X net of cash acquired (Note A) |
(550) |
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Purchase of property, plant and equipment (Note B) |
(350) |
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Proceeds from sale of equipment |
20 |
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Interest received |
200 |
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Dividends received |
200 |
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Net cash used in investing activities |
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(480) |
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Cash flows from financing activities |
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Proceeds from issue of share capital |
250 |
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Proceeds from long-term borrowings |
250 |
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Payment of lease liabilities |
(90) |
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Dividends paid(a) |
(1,200) |
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Net cash used in financing activities |
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(790) |
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Net increase in cash and cash equivalents |
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|
110 |
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Cash and cash equivalents at beginning of period (Note C) |
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|
120 |
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Cash and cash equivalents at end of period (Note C) |
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|
230 |
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(a) This could also be shown as an operating cash flow. |
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Notes to the statement of cash flows (direct method and indirect method)
A. Obtaining control of subsidiary
During the period the Group obtained control of subsidiary X. The fair values of assets acquired and liabilities assumed were as follows:
|
Cash |
40 |
|
Inventories |
100 |
|
Accounts receivable |
100 |
|
Property, plant and equipment |
650 |
|
Trade payables |
(100) |
|
Long-term debt |
(200) |
|
Total purchase price paid in cash |
590 |
|
Less: Cash of subsidiary X acquired |
(40) |
|
Cash paid to obtain control net of cash acquired |
550 |
B. Property, plant and equipment
During the period, the Group acquired property, plant and equipment and right-of-use assets relating to property, plant and equipment with an aggregate cost of 1,250, of which 900 related to right-of-use assets. Cash payments of 350 were made to purchase property, plant and equipment.
C. Cash and cash equivalents
Cash and cash equivalents consist of cash on hand and balances with banks, and investments in money market instruments. Cash and cash equivalents included in the statement of cash flows comprise the following amounts in the statement of financial position:
|
|
20X2 |
|
20X1 |
|
Cash on hand and balances with banks |
40 |
|
25 |
|
Short-term investments |
190 |
|
135 |
|
Cash and cash equivalents as previously reported |
230 |
|
160 |
|
Effect of exchange rate changes |
– |
|
(40) |
|
Cash and cash equivalents as restated |
230 |
|
120 |
Cash and cash equivalents at the end of the period include deposits with banks of 100 held by a subsidiary which are not freely remissible to the holding company because of currency exchange restrictions.
The Group has undrawn borrowing facilities of 2,000 of which 700 may be used only for future expansion.
D. Segment information
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Segment A |
Segment B |
Total |
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Cash flows from: |
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Operating activities |
|
1,520 |
|
(140) |
|
1,380 |
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Investing activities |
|
(640) |
|
160 |
|
(480) |
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Financing activities |
|
(570) |
|
(220) |
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(790) |
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|
310 |
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(200) |
|
110 |
E. Reconciliation of liabilities arising from financing activities
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|
20X1 |
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Cash flows |
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Non-cash changes |
|
20X2 |
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Acquisition |
|
New leases |
|
|
|
Long-term borrowings |
1,040 |
|
250 |
|
200 |
|
– |
|
1,490 |
|
Lease liabilities |
– |
|
(90) |
|
– |
|
900 |
|
810 |
|
Long-term debt |
1,040 |
|
160 |
|
200 |
|
900 |
|
2,300 |
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Alternative presentation (indirect method)
As an alternative, in an indirect method statement of cash flows, operating profit before working capital changes is sometimes presented as follows:
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Revenues excluding investment income |
30,650 |
|
|
|
Operating expense excluding depreciation |
(26,910) |
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Operating profit before working capital changes |
|
|
3,740 |
B Statement of cash flows for a financial institution
1
The example shows only current period amounts. Comparative amounts for the preceding period are required to be presented in accordance with AASB 101 Presentation of Financial Statements.
2
The example is presented using the direct method.
|
|
|
|
20X2 |
|
Cash flows from operating activities |
|
|
|
|
Interest and commission receipts |
28,447 |
|
|
|
Interest payments |
(23,463) |
|
|
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Recoveries on loans previously written off |
237 |
|
|
|
Cash payments to employees and suppliers |
(997) |
|
|
|
|
4,224 |
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(Increase) decrease in operating assets: |
|
|
|
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Short-term funds |
(650) |
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Deposits held for regulatory or monetary control purposes |
234 |
|
|
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Funds advanced to customers |
(288) |
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Net increase in credit card receivables |
(360) |
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Other short-term negotiable securities |
(120) |
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Increase (decrease) in operating liabilities: |
|
|
|
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Deposits from customers |
600 |
|
|
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Negotiable certificates of deposit |
(200) |
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|
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Net cash from operating activities before income tax |
3,440 |
|
|
|
Income taxes paid |
(100) |
|
|
|
Net cash from operating activities |
|
|
3,340 |
|
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Cash flows from investing activities |
|
|
|
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Disposal of subsidiary Y |
50 |
|
|
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Dividends received |
200 |
|
|
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Interest received |
300 |
|
|
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Proceeds from sales of non-dealing securities |
1,200 |
|
|
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Purchase of non-dealing securities |
(600) |
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Purchase of property, plant and equipment |
(500) |
|
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Net cash from investing activities |
|
|
650 |
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Cash flows from financing activities |
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|
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Issue of loan capital |
1,000 |
|
|
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Issue of preference shares by subsidiary undertaking |
800 |
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Repayment of long-term borrowings |
(200) |
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Net decrease in other borrowings |
(1,000) |
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Dividends paid |
(400) |
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|
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Net cash from financing activities |
|
|
200 |
|
Effects of exchange rate changes on cash and cash equivalents |
|
|
600 |
|
Net increase in cash and cash equivalents |
|
|
4,790 |
|
Cash and cash equivalents at beginning of period |
|
|
4,050 |
|
Cash and cash equivalents at end of period |
|
|
8,840 |
C Reconciliation of liabilities arising from financing activities
1
This example illustrates one possible way of providing the disclosures required by paragraphs 44A–44E.
2
The example shows only current period amounts. Corresponding amounts for the preceding period are required to be presented in accordance with AASB 101 Presentation of Financial Statements.
20X1 | Cash flows | Non-cash changes | 20X2 | ||||||||
Acquisition | Foreign exchange movement | Fair value changes | |||||||||
Long-term borrowings | 22,000 | (1,000) | – | – | – | 21,000 | |||||
Short-term borrowings | 10,000 | (500) | – | 200 | – | 9,700 | |||||
Lease liabilities | 4,000 | (800) | 300 | – | – | 3,500 | |||||
Assets held to hedge long-term borrowings | (675) | 150 | – | – | (25) | (550) | |||||
Total liabilities from financing activities | 35,325 | (2,150) | 300 | 200 | (25) | 33,650 | |||||