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DirectMethodofCashFlowStatement
DirectMethod OperatingActivities irect Method Operating Activities
Example:
Accountsreceivable,1/1/10 90,000
p
Creditsalesduringyear 900,000
Less:Accts.receivable,12/31/10 (80,000)
Cashcollections $910,000
DirectMethod OperatingActivities irect Method Operating Activities
Example:
Salariespayable,1/1/10 18,000
Example:
Add:salaries&wageexpense 160,000
Less: Salaries payable 12/31/10 ( 14 000) Less:Salariespayable,12/31/10 (14,000)
Cashpaymentsforsalaries 164,000
Indirect Method of Cash Flow Statement IndirectMethodofCashFlowStatement
+
+
+
AdjustmentforchangesinWorkingCapital(CACL)
+
Note:CashfromInvestingandCashflowfromfinancingActivitiesaresameas
directmethod.
IndirectMethod:
AdjustmentstoNetIncome
Accrualbasisincludesnoncashexpensesandrevenues
Keyadjustments:
Deduct non cash expenses (e g Depreciation Bond Deductnoncashexpenses (e.g.,Depreciation,Bond
DiscountAmortization)
DeductGains (e.g.,PP&EDisposals,BondRetirements)*
AddbackLosses (e.g.,PP&EDisposals,BondRetirements)*
* Entire cash proceeds from LT asset disposals are shown as Investing Entirecashproceeds fromLTassetdisposalsareshownasInvesting
activityandfromLTdebtretirementasFinancingactivity.
Adjustment for Changes in Balance Sheet AdjustmentforChangesinBalanceSheet
SomeUsefulTips
InterestandDividends
Cashflowsarisingfrominterestanddividendsreceivedandpaid(including g p ( g
capitalized)shalleachbedisclosedseparately.
Cashflowsfrominterestanddividendsreceivedandpaidshalleachbe
classifiedinaconsistentmannerfromperiodtoperiodunderappropriate
activityheads.
T I TaxesonIncome
Cashflowsarisingfromtaxesonincomeshallbeseparatelydisclosed.
C h fl i i f t i h ll b l ifi d h fl Cashflowsarisingfromtaxesonincomeshallbeclassifiedascashflows
fromoperatingactivitiesunlesstheycanbespecificallyidentifiedwith
financingandinvestingactivities.
Disclosure Requirements DisclosureRequirements
ComponentsofCashandCashequivalents
Areconciliationoftheamountsforcashandcashequivalentsinits
statementofcashflowswiththeequivalentitemsreportedinthe
statementoffinancialposition.
Thepolicythatitadoptsindeterminingthecompositionofcashandcash
equivalents
Theeffectofanychangeinthepolicyfordeterminingthecompositionsof
cashandcashequivalents.
Theamountofsignificantcashandcashequivalentbalancesheldbythe g q y
entitythatarenotavailableforusebythegroup,withmanagement
comments.
Any other voluntary disclosures Anyothervoluntarydisclosures.
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