This document discusses the requirements of IND AS 7 regarding the statement of cash flows. It defines cash flows, cash, and cash equivalents. It explains the three categories of cash flows - operating, investing and financing activities. It provides examples of cash flow activities that fall under each category. It discusses the direct and indirect methods for preparing the statement of cash flows. It addresses the classification and disclosure requirements regarding interest, dividends, taxes, acquisitions and disposals.

1. IND AS 7 –
STATEMENT OF CASH FLOWS

2. WHAT ARE CASH FLOWS, CASH, AND CASH
EQUIVALENTS?
 Cash flows are inflows and outflows of cash and cash
equivalents;
 Cash is cash on hand and held in demand (at call)
deposits;
 Cash equivalents are short-term, highly liquid
investments readily convertible to cash and subject to an
insignificant risk of changes in value. An investment will
generally be short-term if it is purchased and sold as part
of the entity’s cash management activities and has a
maturity of three months or less from the date of
acquisition – for example, short-term money market
investments and fixed term deposits with a maturity
period of less than three months.

3. • principal revenue-producing activities
• not investing or financing activities
Operating
activities
• acquisition and disposal of long-term
assets
• other investments that are not cash
equivalents
Investing
activities
• activities that change the size and
composition of the contributed equity
and borrowings of the entity
Financing
activities
HOW IS THE STATEMENT OF CASH FLOWS
PRESENTED?

4. Operating
activities
• sale of goods
• suppliers goods and
services
• employees
• insurance
premium/claims
• income taxes
Investing
activities
• cash payments to
acquire and
proceeds from sale
of PPE
• cash payments to
acquire and
proceeds from sale
of equity or debt
• proceeds from sale
of equity or debt
• cash advances and
loans, including
repayments
(excluding loans
from banks)
Financing
activities
• cash proceeds from
issuing shares and
payments for their
redemption;
• cash proceeds from
issuing debentures
and loans and their
repayment;
• cash payments by a
lessee to reduce a
finance lease
liability;
• interest paid (if
classified on that
basis).
EXAMPLES

5.  Direct method
 Indirect method
FORMAT OF CASH FLOWS

6. The following requirements apply to the classification of cash flows
from interest, dividends and tax
Source Classification
Interest paid Must be classified consistently from
period to period as operating or
financing
Dividend paid Must be classified as financing
Interest and
dividends
received
Must be classified consistently from
period to period as operating or
investing
Taxes on
income
Must be separately disclosed and
classified as operating activities unless
they can be specifically identified with
financing and/or investing activities
HOW IS INTEREST, DIVIDENDS AND TAX
CLASSIFIED?

7.  A reconciliation of cash flows arising from operating activities to
profit or loss
 Non-cash financing and investing activities
 The components of cash and cash equivalents
 a reconciliation of the cash disclosed in the cash flow
statement to items in the balance sheet
 Significant cash and cash equivalent balances held that are not
available for use
7
WHAT DISCLOSURES ARE REQUIRED?

8. Disclosures of the following information (in aggregate) is required
in relation to acquisitions and disposals of subsidiaries and
business units:
 Total purchase or disposal consideration
 The amount of consideration discharged in cash
 The amounts of cash and cash equivalents in the subsidiary or
business unit
 The non-cash assets and liabilities in the subsidiary or business
unit
WHAT DISCLOSURES ARE REQUIRED?

9. Anand Banka
Partner,
Talati & Talati
Chartered Accountants
Email: anand.banka@talatiandtalati.com
Mob: 98673 53743