This document discusses advanced cash flow topics focusing on cumulative translation adjustment (CTA) and non-cash items. It outlines the importance of accurately reporting currency impacts on cash flow and differentiating between cash and non-cash activities in financial reporting. The author emphasizes various approaches for implementing these concepts within financial systems, ensuring clear tracking of cash flows and appropriate categorization of transactions.

1. Advanced Topics in Cash Flow
How to Make HFM do the Dirty Work
August 24, 2018
Matt Spencer

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7. About the Presenter
Slide 7
Matt Spencer
(mspencer@finit.com)
Experience
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and privately held companies
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8. Agenda
Slide 8
• Overview / Today’s Goals
• Main Topics
• CTA in the Cash Flow
• Overview of CTA
• HFM Approaches / Examples
• Overrides - Discussion
• Non-Cash Items
• Overview of Non-Cash
• HFM Approaches / Examples

9. Overview
Slide 9
• More advanced cash flow topics – CTA and Non-Cash Items
• HFM Solutions for both of these
• General cash flow presentation can be sent on request
• Today’s Key Takeaways:
• General Understanding
• WHY do we need to account for these items in the Cash Flow
• HOW can we design an application to meet those needs?
• Not all inclusive – but a good start to get you thinking

10. Cumulative Translation Adjustment - CTA
Slide 10

11. CTA Overview
Slide 11
• Review of Cumulative Translation Adjustment (CTA):
• Currency impact on change in Net Assets
• Due to rate changes over time
• Holding Place on the Balance Sheet
• Will eventually come through the P&L
• Why can’t we just translate the Balance Sheet?
1. P&L translated at AVERAGE rate and rolls to Retained Earnings
2. Everything else on the BS translates at EOM rates
3. Except for accounts that have historical currency overrides
(Investment in Sub / Shareholder Contributions)

12. CTA Overview - Example
Slide 12
CAD USD USD USD
Local Currency Exchange Rate Translated Currency Override Amount Post-Override
Income Statement:
Sales 100.00$ 0.85 85.00$ -$ 85.00$
Cost of Sales 75.00$ 0.85 63.75$ -$ 63.75$
Net Income 25.00$ 21.25$ -$ 21.25$
Balance Sheet:
Cash 1,100.00$ 0.90 990.00$ 990.00$
Accounts Receivable 100.00$ 0.90 90.00$ 90.00$
Assets 1,200.00$ 1,080.00$ -$ 1,080.00$
Debt 575.00$ 0.90 517.50$ 517.50$
Liabilities 575.00$ 517.50$ -$ 517.50$
Net Income 25.00$ 0.85 21.25$ -$ 21.25$
Parent Investment 600.00$ 0.90 540.00$ 750.00$ 750.00$
CTA -$ 1.25$ (208.75)$
Equity 625.00$ 562.50$ 750.00$ 562.50$
Balance -$ -$ -$
Here, we can see that our CTA is
made up of our Income
Statement amount of $1.25,
and the difference between our
translated Parent Investment
and the Override of $(210).
Balance Sheet / Income Statement
Rate Portion (Net Income *
difference in Avg/EOM Rates):
$25*(.9-.85)

13. CTA Overview
• We need to calculate CTA for the cash flow because…
• Noncash item that impacts the balance of cash in translated currencies
• Not captured in the Operating section, since it does not come through
the Income Statement
• Without it, we can’t reconcile beginning cash to ending cash with the
Operating/Investing/Financing alone

14. CTA Overview
**DISCLAIMER**
When we talk about “CTA”, true CTA is the impact of the
currency translation items on the ENTIRE balance sheet. For the
purposes of our presentation, we are really just talking about
the impact of changes in exchange rates on the CASH ACCOUNT

15. CTA Approach 1:
Traditional GAAP Reporting
Slide 15

16. CTA Approach: Default GAAP Format
Slide 16
• “2D” approach – no breakout for
each Balance Sheet category
• Trying to calculate single line item
to be reported on Cash Flow
statement
• Calculation of translation impact on
the cash account (the amount that
the cash account contributes to
CTA on the Balance Sheet)

17. CTA Approach: Default GAAP Format
Slide 17
• Simple metadata setup:
1. Create account in CF statement
2. Include a spot for CF data type
in a custom
*Disclaimer* The cash flow data type isn’t absolutely necessary, but it is a
good practice to 1. Isolate your cash flow activity from other trial balance
activity for the purpose of rule writing, and 2. Have the ability to distinguish
cash flow activity that is input by users vs. calculated by the application

18. CTA Approach: Default GAAP Format
Slide 18
• Straightforward “CTA” calculation in this approach.
• The impact of currency translation in our cash flow is essentially
the difference between activity translated at end of month rates,
and activity translated at average rates:
Two ways to validate
this amount
Ending 135,000
Activity (42,500)
Beginning (90,000)
Net 2,500
“Plug” the translated
difference:
Calculate difference of the
activity translated at End of
Month and Average Rates:
Activity @ EOM: 50,000 * .9 = 45,000
Activity @ AVG: 50,000 * .85 = 42,500
Net 2,500
Cash Beginning Activity Cash Ending Currency Impact
Local Currency 100,000 50000 150,000 -
Translation Rates 0.9 0.85 0.9
Translated Amounts 90,000 42,500 135,000 2,500

19. CTA Approach: Default GAAP Format
• Here’s how we could see this approach written in the rules:
We only need this run on translated currencies. For the local currencies,
Ending – Activity – Beginning should always be zero, so we don’t need the rule to run there
Only specifically calling out the Custom4 member. So rule will run for all members in Custom1, 2,
and 3. For your own application, think about what you want this rule to apply to
Set Beginning and Ending
Cash, pull these straight
from the BS

20. CTA Approach: Default GAAP Format – Finished Product
Cash Beginning Activity Cash Ending Currency Impact
Local Currency 100,000 50000 150,000 -
Translated Amounts 90,000 42,500 135,000 2,500

21. CTA Approach 2:
Balance Sheet Breakout
Slide 21

22. CTA Approach: Balance Sheet Breakout
Slide 22
• Intended for applications where cash flow statement is broken out for balance sheet categories:
• The primary difference: FX on cash is a net of the other balance sheet categories
• NOT directly calculated
Cash AR Inventory Other Assets PPE AP Other Liabilities Long-Term Debt Retained Earnings Common Stock
Beginning Balance 81,000 90,000 45,000 67,500 130,500 13,500 18,000 67,500 225,000 90,000
Net Income 85,000 85,000
Adjustments to Reconcile Net Income to Cash
Depreciation 4,250 (4,250)
Amortization 1,700 (1,700)
Changes in Current Assets and Liabilities
Net Change in AR (12,750) 12,750
Net Change in Inventories (10,200) 10,200
Net Change in AP (2,550) (2,550)
Net Change in Other Assets (4,250) 4,250
Net Change in Other Liabilities (5,100) (5,100)
Net Cash from Operating Activities 56,100 12,750 10,200 2,550 (4,250) (2,550) (5,100) - 85,000 -
Purchases of PPE (8,500) 8,500
Sales of PPE 2,550 (2,550)
Net Cash from Investing Activities (5,950) - - - 5,950 - - - - -
Issuances of Long-term Debt 42,500 42,500
Payments on Long-term Debt (25,500) (25,500)
Issuances of Common Stock 17,000 17,000
Net Cash from Financing Activities 34,000 - - - - - - 17,000 - 17,000
Exchange Rate Impact (CTA) 4,950 750 600 150 100 (150) (300) 1,000 5,000 1,000
Net Increase (Decrease) 89,100 13,500 10,800 2,700 1,800 (2,700) (5,400) 18,000 90,000 18,000
Ending Balance 170,100 103,500 55,800 70,200 132,300 10,800 12,600 85,500 315,000 108,000

23. CTA Approach: Balance Sheet Breakout
Slide 23
• Slightly different metadata approach
• Use of additional custom dimension for BS groups
• Cash activity is derived from this activity, not calculated
• CF_NETCASH parent aggregates/nets activity for all other BS groups
The activity in these
members will
aggregate/net to the
parent “CF_NETCASH”

24. CTA Approach: Balance Sheet Breakout
Slide 24
• Calculations not remarkably different
• Instead of calculating the CTA/FX impact for the cash account, activity is calculated for
all other balance sheet categories,
• That activity is netted to find cash activity
Beginning Activity Ending Beginning Activity Ending CTA
AR 100,000 15,000 115,000 90,000 12,750 103,500 750
Inventory 50,000 12,000 62,000 45,000 10,200 55,800 600
Other Assets 75,000 3,000 78,000 67,500 2,550 70,200 150
PPE 145,000 2,000 147,000 130,500 1,700 132,300 100
AP 15,000 (3,000) 12,000 13,500 (2,550) 10,800 (150)
Other Liabilities 20,000 (6,000) 14,000 18,000 (5,100) 12,600 (300)
Long-Term Debt 75,000 20,000 95,000 67,500 17,000 85,500 1,000
Retained Earnings 250,000 100,000 350,000 225,000 85,000 315,000 5,000
Common Stock 100,000 20,000 120,000 90,000 17,000 108,000 1,000
Net 90,000 99,000 189,000 81,000 84,150 170,100 4,950
Local Currency Translated Currency
This line represents what we would expect to see in our “cash” column
AVG Rate 0.85 Used for Activity
EOMRate 0.90 Used for Beginning and Ending Balances

25. CTA Approach: Balance Sheet Breakout
Beginning Activity Ending Beginning Activity Ending CTA
AR 100,000 15,000 115,000 90,000 12,750 103,500 750
Inventory 50,000 12,000 62,000 45,000 10,200 55,800 600
Other Assets 75,000 3,000 78,000 67,500 2,550 70,200 150
PPE 145,000 2,000 147,000 130,500 1,700 132,300 100
AP 15,000 (3,000) 12,000 13,500 (2,550) 10,800 (150)
Other Liabilities 20,000 (6,000) 14,000 18,000 (5,100) 12,600 (300)
Long-Term Debt 75,000 20,000 95,000 67,500 17,000 85,500 1,000
Retained Earnings 250,000 100,000 350,000 225,000 85,000 315,000 5,000
Common Stock 100,000 20,000 120,000 90,000 17,000 108,000 1,000
Net 90,000 99,000 189,000 81,000 84,150 170,100 4,950
Local Currency Translated Currency

26. CTA Approach: Balance Sheet Breakout
• Rules are similar to approach calculating just the cash account
• Couple extra steps to get each balance sheet group
• Loop through each Custom2 member that is part of “cash flow category” rollup
Note that C2 members have been named
identical to balance sheet account, only prefixed
with “CF_”. This allows a more flexible rule, So
we don’t need to write a specific rule for each
category.

27. CTA Approach: Balance Sheet Breakout – Finished Product
Beginning/ending
balances populated
in the rules
Since it is a parent, the Cash activity is the net, or the
aggregate of all of the other balance sheet categories
Cash AR Inventory Oth Assets PPE AP Oth Liab LT Debt Ret Earnings Common Stock
Beginning Balance 81,000 90,000 45,000 67,500 130,500 13,500 18,000 67,500 225,000 90,000
Net Income 85,000 85,000
Adjustments to Reconcile Net Income to Cash
Depreciation 4,250 (4,250)
Amortization 1,700 (1,700)
Changes in Current Assets and Liabilities
Net Change in AR (12,750) 12,750
Net Change in Inventories (10,200) 10,200
Net Change in AP (2,550) (2,550)
Net Change in Other Assets (4,250) 4,250
Net Change in Other Liabilities (5,100) (5,100)
Net Cash from Operating Activities 56,100 12,750 10,200 2,550 (4,250) (2,550) (5,100) - 85,000 -
Purchases of PPE (8,500) 8,500
Sales of PPE 2,550 (2,550)
Net Cash from Investing Activities (5,950) - - - 5,950 - - - - -
Issuances of Long-term Debt 42,500 42,500
Payments on Long-term Debt (25,500) (25,500)
Issuances of Common Stock 17,000 17,000
Net Cash from Financing Activities 34,000 - - - - - - 17,000 - 17,000
Exchange Rate Impact (CTA) 4,950 750 600 150 100 (150) (300) 1,000 5,000 1,000
Net Increase (Decrease) 89,100 13,500 10,800 2,700 1,800 (2,700) (5,400) 18,000 90,000 18,000
Ending Balance 170,100 103,500 55,800 70,200 132,300 10,800 12,600 85,500 315,000 108,000

28. Non-Cash Activity
Slide 28

29. Non-Cash Activity: Introduction
• What are these – why would you want to segregate them
from other cash flow activity?
• You already capture some non-cash activity through the
pickup of P&L lines in the operating section
• But what about activity that doesn’t come through the
P&L?

30. Non-Cash Activity: Introduction
• What are some examples of non-cash activity?
• Moving AR to “Other Receivables”
• Moving AP to “Other Payables”
• Moving PPE to “Other Assets”
• Any type of reclassification from one balance sheet group to another
• If we don’t separate these items out as “non-cash”, then the
activity could be reported in the incorrect line in the cash flow.
• For example, something reclassified out of AR would show up in the cash
flow line in the Operating section

31. Non-Cash Activity: Introduction
• If we don’t these items out as “non-cash”, then the activity could be reported in
the incorrect line in the cash flow.
• What if this was a reclass between PPE and Other Assets? Or Debt and Other Liabilties?
Without Non-
Cash Separated
Non-Cash
Transfer
With Non-Cash
Separated
Net Income 85,000 85,000
Adjustments to Reconcile Net Income to Cash
Depreciation 4,250 4,250
Amortization 1,700 1,700
Changes in Current Assets and Liabilities
Net Change in AR (12,750) 3,000 (9,750)
Net Change in Inventories (10,200) (10,200)
Net Change in AP (2,550) (2,550)
Net Change in Other Assets (4,250) (3,000) (7,250)
Net Change in Other Liabilities (5,100) (5,100)
Net Cash from Operating Activities 56,100 56,100

32. Non-Cash Activity: Introduction
•Similar to the other cash flow examples, there are a
couple of different ways to handle this activity in HFM:
• Data type approach (Single-Column GAAP)
• Roll forward approach (Balance Sheet Groups)
• For full explanation items (PPE)
• For balance change items (AR)

33. Non-Cash Activity: Data Type
Slide 33

34. Non-Cash Activity: Data Type Approach
• Cash flow setups using traditional GAAP-style reporting
• No balance sheet group detail
• Non-Cash activity handled through a “Data Type”
• Layers non-cash activity on top of original cash flow line items
• Custom dimension utilized

35. Non-Cash Activity: Data Type Approach
• Metadata:
When combined with
the CF_INPUT or
CF_CALC members, the
total will be an
“Adjusted” CF amount

36. Non-Cash Activity: Data Type Approach
• Rules…None, really
• Think through the following items:
• Member lists?
• NoInput Rules?
• Top Customs?
• Data Forms?
• Eliminations?

37. Non-Cash Activity: Data Type Approach
Original Activity Adjustment Post-Adjusted
CF_INPUT / CF_CALC CF_NONCASH CF_DATATYPE
Net Income 85,000 85,000
Adjustments to Reconcile Net Income to Cash
Depreciation 4,250 4,250
Amortization 1,700 1,700
Changes in Current Assets and Liabilities
Net Change in AR (12,750) 3,000 (9,750)
Net Change in Inventories (10,200) (10,200)
Net Change in AP (2,550) (2,550)
Net Change in Other Assets (4,250) (3,000) (7,250)
Net Change in Other Liabilities (5,100) (5,100)
Net Cash from Operating Activities 56,100 56,100

38. Non-Cash Activity: Roll Forward
Slide 38

39. Non-Cash Activity: Roll Forward Approach
• Best used for Cash Flows that break out all BS groupings
• Non-Cash roll forward member outside of the cash-flow
• Need to back out of “Net Change” calculations (AR, AP, etc.)

40. Cash AR Inventory Oth Assets PPE AP Oth Liab LT Debt Ret Earnings Common Stock
Beginning Balance 81,000 90,000 45,000 67,500 130,500 13,500 18,000 67,500 225,000 90,000
Net Income 85,000 85,000
Adjustments to Reconcile Net Income to Cash
Depreciation 4,250 (4,250)
Changes in Current Assets and Liabilities
Net Change in AR (12,750) 12,750
Net Change in Inventories (10,200) 10,200
Net Change in AP (2,550) (2,550)
Net Change in Other Assets (4,250) 4,250
Net Change in Other Liabilities (5,100) (5,100)
Net Cash from Operating Activities 54,400 12,750 10,200 6,750 (4,250) (2,550) (5,100) - 85,000 -
Purchases of PPE (8,500) 8,500
Sales of PPE 2,550 (2,550)
Net Cash from Investing Activities (5,950) - - - 5,950 - - - - -
Issuances of Long-term Debt 42,500 42,500
Payments on Long-term Debt (25,500) (25,500)
Issuances of Common Stock 17,000 17,000
Net Cash from Financing Activities 34,000 - - - - - - 17,000 - 17,000
Net Increase (Decrease) 82,450 12,750 10,200 4,250 1,700 (2,550) (5,100) 17,000 85,000 17,000
Ending Balance 163,450 102,750 55,200 71,750 132,200 10,950 12,900 84,500 310,000 107,000
Non-Cash Activity: Roll Forward Approach
• Example: $2,500 Non-Cash Transfer from Other Assets to PPE
• Not pictured in the amounts below

41. Non-Cash Activity: Roll Forward Approach
• Metadata – Just adding a new account
• SIBLING to Op/Inv/Fin
• Still using our Balance Sheet groups
• Data Type is optional – redundant w/account

42. Non-Cash Activity: Roll Forward Approach
• Amounts should ALWAYS net between Custom2 members!
• The impact to CF_NETCASH should be 0!

43. Non-Cash Activity: Roll Forward Approach
• For members where users explain activity (PPE, Debt, etc.), it’s just
another category of activity:
• No calculation changes required
Cash PPE Oth Assets
Beginning Balance 81,000 130,500 67,500
Net Income 85,000
Adjustments to Reconcile Net Income to Cash
Depreciation 4,250 (4,250)
Changes in Current Assets and Liabilities
Net Change in AR (12,750)
Net Change in Inventories (10,200)
Net Change in AP (2,550)
Net Change in Other Assets (4,250) 4,250
Net Change in Other Liabilities (5,100)
Net Cash from Operating Activities 54,400 (4,250) 4,250
Purchases of PPE (8,500) 8,500
Sales of PPE 2,550 (2,550)
Net Cash from Investing Activities (5,950) 5,950 -
Issuances of Long-term Debt 42,500
Payments on Long-term Debt (25,500)
Issuances of Common Stock 17,000
Net Cash from Financing Activities 34,000 - -
Net Increase (Decrease) 82,450 1,700 4,250
Non-Cash Activity - 2,500 (2,500)
Ending Balance 163,450 134,700 74,250
- - (2,500)

44. Non-Cash Activity: Roll Forward Approach
• But what about when the net change is calculated?
• We need to update our rules
Cash PPE Oth Assets
Beginning Balance 81,000 130,500 67,500
Net Income 85,000
Adjustments to Reconcile Net Income to Cash
Depreciation 4,250 (4,250)
Changes in Current Assets and Liabilities
Net Change in AR (12,750)
Net Change in Inventories (10,200)
Net Change in AP (2,550)
Net Change in Other Assets (4,250) 4,250
Net Change in Other Liabilities (5,100)
Net Cash from Operating Activities 54,400 (4,250) 4,250
Purchases of PPE (8,500) 8,500
Sales of PPE 2,550 (2,550)
Net Cash from Investing Activities (5,950) 5,950 -
Issuances of Long-term Debt 42,500
Payments on Long-term Debt (25,500)
Issuances of Common Stock 17,000
Net Cash from Financing Activities 34,000 - -
Net Increase (Decrease) 82,450 1,700 4,250
Non-Cash Activity - 2,500 (2,500)
Ending Balance 163,450 134,700 74,250
- - (2,500)

45. Non-Cash Activity: Roll Forward Approach
• Need to make sure our Non-Cash items are being backed out of the
“Net Change” calculations
Ending Balance
- Beginning Balance
- Non-Cash Activity
Net Change in Account
BEFORE AFTER
Oth Assets Oth Assets
Beginning Balance 67,500 67,500
Net Income
Adjustments to Reconcile Net Income to Cash
Depreciation
Changes in Current Assets and Liabilities
Net Change in AR
Net Change in Inventories
Net Change in AP
Net Change in Other Assets 4,250 6,750
Net Change in Other Liabilities
Net Cash from Operating Activities 4,250 6,750
Purchases of PPE
Sales of PPE
Net Cash from Investing Activities - -
Issuances of Long-term Debt
Payments on Long-term Debt
Issuances of Common Stock
Net Cash from Financing Activities - -
Net Increase (Decrease) 4,250 6,750
Non-Cash Activity (2,500) (2,500)
Ending Balance 74,250 74,250
(2,500) -
71,750 71,750

46. Non-Cash Activity: Roll Forward Approach – Final Product
Cash AR Inventory Oth Assets PPE AP Oth Liab LT Debt Ret Earnings Common Stock
Beginning Balance 81,000 90,000 45,000 67,500 130,500 13,500 18,000 67,500 225,000 90,000
Net Income 85,000 85,000
Adjustments to Reconcile Net Income to Cash
Depreciation 4,250 (4,250)
Changes in Current Assets and Liabilities
Net Change in AR (12,750) 12,750
Net Change in Inventories (10,200) 10,200
Net Change in AP (2,550) (2,550)
Net Change in Other Assets (4,250) 6,750
Net Change in Other Liabilities (5,100) (5,100)
Net Cash from Operating Activities 54,400 12,750 10,200 6,750 (4,250) (2,550) (5,100) - 85,000 -
Purchases of PPE (8,500) 8,500
Sales of PPE 2,550 (2,550)
Net Cash from Investing Activities (5,950) - - - 5,950 - - - - -
Issuances of Long-term Debt 42,500 42,500
Payments on Long-term Debt (25,500) (25,500)
Issuances of Common Stock 17,000 17,000
Net Cash from Financing Activities 34,000 - - - - - - 17,000 - 17,000
Net Increase (Decrease) 82,450 12,750 10,200 6,750 1,700 (2,550) (5,100) 17,000 85,000 17,000
Non-Cash Activity - (2,500) 2,500
Ending Balance 163,450 102,750 55,200 74,250 134,700 10,950 12,900 84,500 310,000 107,000
Should
ALWAYS Be $0
71,750

47. Q & A

48. Thank you for Attending!
Today’s Presenter:
Matt Spencer
mspencer@finit.com
Greg Barrett
gbarrett@finit.com
Copy of the slides or Recording:
Email us for a copy of the slides or a
link to the recording
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