The document discusses IAS 7 Statement of Cash Flows and its implementation in SAP S/4HANA Finance. It states that IAS 7 prescribes how to present information about changes in an entity's cash and cash equivalents during a period. It requires cash flows to be classified into operating, investing and financing activities. The document also provides details on configuring SAP S/4HANA Finance to generate cash flow statements that are compliant with IAS 7 using both the direct and indirect method.

1. IAS 7 & SAP S/4HANA FINANCE
10/23/2022 adielekelechi739@yahoo.com (+2347034813335) 1
IAS 7
Statement of Cash Flows
SAP S/4HANA
FINANCE
KELECHI KELLY ADIELE
International Accounting Standards (IAS)
Operating
Activities
Investing
Activities
Financing
Activities

2. International Accounting standards(IAS) & SAP S/4HANA
What is an IFRS & IAS?
IFRS means International Financial Reporting Standard standard while IAS means International Accounting
standards. Just like every other profession, the accounting profession has laws and standards that guides
how accountants or anyone practicing accounting report financial activities.
SAP has also ensured SAP S/4HANA is IAS and IFRS compliant through the parallel accounting and
accounting principles functionality, the introduction on the universal journals (ACDOCA)- The Single source
of truth, OLTP & OLAP, Compatibility and Simplification views, the concept of Business partners, reporting
and analytics etc.
These functionalities will be discussed later in this presentation. Also, these functionalities ensure that
companies across the global can have a unified financial reporting structure, improve speed, accuracy and
fairness in reporting financial operations and preparing financial statements for management and external
users.
NOTE: IAS 7 -Statement of Cash Flows
10/23/2022 adielekelechi739@yahoo.com (+2347034813335) 2

3. About IAS- Statement of Cash Flows
IAS 7 prescribes how to present information in a statement of cash flows
about how an entity’s cash and cash equivalents changed during the
period. Cash comprises cash on hand and demand deposits. Cash
equivalents are short-term, highly liquid investments that are readily
convertible to known amounts of cash and that are subject to an
insignificant risk of changes in value.
10/23/2022 adielekelechi739@yahoo.com (+2347034813335) 3
https://www.ifrs.org/issued-standards/list-of-standards/ias-7-statement-of-cash-flows/#:~:text=IAS%207%20requires%20an%20entity,the%20statement%20of%20financial%20position.

4. The statement classifies cash flows during a period into cash flows
from operating, investing and financing activities:
Point 1: Operating activities are the principal revenue-producing activities of the entity
and other activities that are not investing or financing activities. An entity reports cash
flows from operating activities using either:
• The direct method, whereby major classes of gross cash receipts and gross cash
payments are disclosed; or
• The indirect method, whereby profit or loss is adjusted for the effects of transactions of
a non-cash nature, any deferrals or accruals of past or future operating cash receipts or
payments and items of income or expense associated with investing or financing cash
flows.
10/23/2022 adielekelechi739@yahoo.com (+2347034813335) 4
https://www.ifrs.org/issued-standards/list-of-standards/ias-7-statement-of-cash-flows/#:~:text=IAS%207%20requires%20an%20entity,the%20statement%20of%20financial%20position.

5. The statement classifies cash flows during a period into cash
flows from operating, investing and financing activities:
Point 2: Investing activities are the acquisition and disposal of long-term assets
and other investments not included in cash equivalents. The aggregate cash flows
arising from obtaining and losing control of subsidiaries or other businesses are
presented as investing activities. Financing activities are activities that result in
changes in the size and composition of the contributed equity and borrowings of
the entity.
Point 3: Investing and financing transactions that do not require the use of cash or
cash equivalents are excluded from a statement of cash flows but separately
disclosed. IAS 7 requires an entity to disclose the components of cash and cash
equivalents and to present a reconciliation of the amounts in its statement of cash
flows with the equivalent items reported in the statement of financial position.
10/23/2022 adielekelechi739@yahoo.com (+2347034813335) 5
https://www.ifrs.org/issued-standards/list-of-standards/ias-7-statement-of-cash-flows/#:~:text=IAS%207%20requires%20an%20entity,the%20statement%20of%20financial%20position.

6. Configuration for Cash Flow Statements: Direct & Indirect Method
10/23/2022 adielekelechi739@yahoo.com (+2347034813335) 6
For direct method, you maintain the settings as follows:
Define the liquidity items in the Edit Liquidity Items Customizing
activity. You can find this activity under
Financial Supply Chain> Management> Cash and Liquidity
Management > Cash Management > Liquidity Items > Edit Liquidity
Items.

7. 2. Define the liquidity item hierarchies in the Manage Global Hierarchies - For Liquidity Items.
3. Define the default liquidity items in the Define Default Liquidity Items for G/L
Accounts Customizing activity. You can find this activity under Financial Supply Chain
Management > Cash and Liquidity Management > Cash Management Liquidity Items
> Derivation Rules for Liquidity Items> Define Default Liquidity Items for G/L Accounts.
10/23/2022 adielekelechi739@yahoo.com (+2347034813335) 7

8. Setting Up Your Compliance Reporting
• Go through the steps of the process for setting up your compliance reporting.
• To do so, make the required settings in Customizing for Financial Accounting > Advanced Compliance
Reporting > Setting Up Your Compliance Reporting
10/23/2022 adielekelechi739@yahoo.com (+2347034813335) 8

9. The financial Statement Version(FSV) and IAS 7-Statement of Cash Flows
A financial statement version (FSV) is a hierarchical arrangement of G/L accounts which produces the general
purpose financial statements as prescribed by IAS 1 and IAS 7.
The accounts can be arranged in accordance with the legal regulations used to generate your financial
statements like IAS, IFRS, GAAP etc.
The accounts in the financial statement version can also be arranged in accordance with the business
requirements based on the methods of Cash flow ( Direct & Indirect) according to IAS 7
The Cash flow statement in the financial statement version should provide information about: operating
activities, Financing activities and Investing activities.
10/23/2022 adielekelechi739@yahoo.com (+2347034813335) 9

10. SAP S/4HANA Finance: Cash flow Reporting- Direct & Indirect method
10/23/2022 adielekelechi739@yahoo.com (+2347034813335) 10