A Business Case Presented to the Accountancy Department De La Salle University

In partial fulfillment Of the course requirements In Financial Accounting (MODFIN3)

SUBMITTED TO: Mr. Michael Mercado

SUBMITTED BY: Santos, Javier Anson, M; K33

The statement of cash flows is a financial statement that focuses the movement of cash account of the entity, specifically the inflow and outflow of cash from the entitys activities and operations. Investors decisions are also affected on what is shown on the statement of cash flows since it shows on how the entity generates and manages its cash account. Since it displays a great importance on the decision making of interested external users such as businessmen and investors, its presentation must be strictly in accordance with the requirements of the International Accounting Standards specifically the IAS7 and present it as an integral part of the financial statements. As stated in the standards, the statement of cash flows provides information that enables the users to evaluate the changes in the net assets of the entity, its financial structure, and its ability to affect the amounts and timing of cash flows in order to adapt the changing circumstances and opportunities. The information provided by the statement of cash flows helps interested external users to compare and evaluate different values of cash flows as well as performances of different entities, thus helping them on their decision making. The presentation of the statement of cash flows is divided into three parts, namely: operating activities, investing activities, and financing activities. Cash flows from operating activities are basically generated from the nature of the business of the entity. Examples of cash flows from operating activities are cash receipts from sale of goods and cash payments of purchase of goods. Cash flows from investing activities includes purchase and sale of property, plant, and equipment, and investments, or basically non-current assets. Examples are cash proceeds from the sale of machineries and cash payments for the purchase of investments. While cash flows from financing activities involve the movement of cash from the equity and non-current lia bilities of the company. Examples

are proceeds from the issuance of preference shares and ordinary shares, and bonds, and payments for principals of loans. In the statement of cash flows of Semirara Mining Corporation, it was able to present the cash flows from 2009 to 2011. The interested parties would be able to compare the increase and decrease in the cash flows of the entity. All the required and necessary information is presented well which was also in accordance with the standards. Investors may view that the entity has been generating better cash flows over the years due to the better cash and cash equivalents balance at year end. Notes were also clearly stated to show the activities and movement of cash in a clear and detailed presentation to be able to understand more of the activities undertaken. In relation to what is learned in the academe, Semirara has shown a good presentation of the financial statements. The statement shows that the entity had a better cash generation from operations in 2010 of Php 7,493,724,919 compared to Php 6,989,226,108 of 2011. One factor is that, even though the entity has received more interests during the year, it paid a greater amount of income taxes than the previous years which would mean that the company had better revenue generation the current year. But still the company had a lesser amount of net cash flows from operating activities of Php 6,643,454,925 against to Php 6,725,016,362 of last year. For the net cash in investing activities, the entity had higher amounts of (Php 2,557,515,351) for the present year than (Php 12,945,939,169) of the previous year. It might be due to the decrease in the purchase of additional property, plant, and equipment, additional investments, and higher proceeds in the sale of equipments. In the case of net cash for financing activities, the company had a negative balance of (Php 2,901,635,661) for the current year and Php 9,550,405,389 for the past year. It is due to the higher

payments dividends, long-term debts, and short-term debts for the current year than the past year, and the company was not able to receive much proceeds for the avail of debts and loans, and issuance of shares. But in summing up the entire cash flows of the entity, it was able to generate a better cash and cash equivalent balance of Php 5,005,240,275 than the previous year balance of Php 3,813,283,517. The different analyses and study of the statement of cash flows in the academe has led to a wider and better understanding of the different activities which may lead to the different amounts present in the financial statements. Deriving to such net cash amount is understood in a greater sense due to a clearer view on the factors that may lead to such balances. As a student, it further increased my knowledge about the standards governing the statement of cash flows, the IAS7, and has given me more challenge in fulfilling the dream of being a Certified Public Accountant.