Вы находитесь на странице: 1из 2

UNIVERSITY OF PERPETUAL HELP SYSTEM DALTA

CALAMBA CAMPUS, BRGY. PACIANO RIZAL


CALAMBA CITY, LAGUNA, PHILIPPINES

Chapter 10 – PAS 10: STATEMENT OF CASH FLOWS EDMUND E. HILARIO, CPA, MBA
FINANCIAL ACCOUNTING 1St SEMESTER 2019 – 2020
=============================================================================
A. Statement of Cash flows g) Cash receipts and payments for securities
A statement of cash flows is a component of financial held for trading
statements summarizing the operating, investing and
financial activities of an entity. Meaning, the Note: Trading securities under PAS 7, paragraph
statement of cash flows primary purposes is to 15, provides that cash flows arising from the
provide information about the cash receipts and cash purchase and sale of dealing or trading securities
payments of an entity during a period. An entity are classified as operating activities.
shall prepare a statement of cash flows and present it
as an integral part of the financial statements for Similarly cash advance and loans made by a
each period for which the financial statements are financial institution are usually classified as
presented. operating activities since they relate to the main
revenue producing activity of that entity.
B. Cash and cash equivalent
The statement of cash flows is designed to provide 2) Investing activities
information about the changes in an entity’s cash and Investing activities are the cash flows derived
cash equivalents. from the acquisition and disposal of long-term
a) Cash – comprises cash on hand, and demand assets and other investments not included in
deposits cash equivalent. It includes activities cash flows
b) Cash equivalents – are short-term highly liquid from transaction involving non-operating assets.
investments that are readily convertible to Examples are as follows:
known amount of cash and which are subject to a) Cash payments to acquire PPE, intangible
an insignificant risk of change in value. PAS 7, and other long-term assets
paragraph 7, provides that an investment b) Cash receipts from sale of PPE, intangible
normally qualifies as a cash equivalent only when and other long-term assets
it has a short maturity of three months or less c) Cash payment to acquire equity or debt
from date of acquisition. Examples of cash instrument of other entities whether current
equivalents: and non-current investments
1. Three-month BSP treasury bill d) Cash receipts from sale of equity or debt
2. Three-year BSP treasury bill purchased 3 instrument of other entities whether current
months before date of maturity and non-current investments
3. Three-month time deposit e) Cash advances and loans to other parties
4. Three-months money market instrument or other than advances and loans made by
commercial paper financial institution
f) Cash receipts from repayment of advances
C. Classification of cash flows and loans made by other parties
Cash flows are inflows and outflows of cash and cash g) Cash payments for future contracts, forward
equivalents. The statement of cash flows shall report contracts, option contract and swap contract
cash flows during the period classified as: h) Cash receipts from future contracts, forward
1) Operating activities – are the cash flows derived contracts, option contract and swap contract
primarily from the principal revenue producing
activities of the entity. Meaning, the operating 3) Financing activities
activities generally result from transactions and Financing activities are the cash flows derived
other events that enter into the determination of from the equity, capital and borrowings of the
net income or loss. Examples are as follows: entity. Meaning, financing activities are the cash
a) Cash receipts from sale of goods and flows that result from transactions:
rendering of services a) Between the entity and the owners – equity
b) Cash receipts from royalties, rental, fees, financing
commissions and other revenue b) Between the entity and the creditors – debt
c) Cash payments to suppliers for goods and financing
services
As a result, financing activities include the cash
d) Cash payments for selling, administrative
flows from transactions involving nontrade
and other expenses
liabilities and equity of an entity. Examples are
e) Cash receipts and cash payments of an
as follows:
insurance entity for premiums and claims,
a) Cash receipts from issuance of ordinary and
annuities and other policy benefits
preference shares
f) Cash payments or refunds of income taxes
b) Cash payments to acquire treasury stocks
unless specifically identified with financing
and investing activities

============================================================================================
Page 1 of 2
UNIVERSITY OF PERPETUAL HELP SYSTEM DALTA
CALAMBA CAMPUS, BRGY. PACIANO RIZAL
CALAMBA CITY, LAGUNA, PHILIPPINES

Chapter 10 – PAS 10: STATEMENT OF CASH FLOWS EDMUND E. HILARIO, CPA, MBA
FINANCIAL ACCOUNTING 1St SEMESTER 2019 – 2020
=============================================================================
c) Cash receipts from issuing debentures, PAS 7, paragraph 35, provides that cash flows arising
loans, notes, bonds, mortgages, and other from income taxes shall be separately disclosed as
short or long term borrowing cash flow from operating activities unless they can be
d) Cash payments for amounts borrowed specifically identified with investing and financing
e) Cash payments by a lessee for the reduction activities. Tax cash flows are often difficult to match
of the outstanding principal lease liability to the originating underlying transactions, so most of
the time all tax cash flows are classified as arising
Note: Cash payments to settle such obligations from operating activities.
as trade accounts and notes payable, income tax
payable, accrued expenses are operating
activities not financing activities.

D. Noncash transactions
PAS 7, paragraph 43, provides that investing and
financing activities transactions that do not require
use of cash or cash equivalents shall be excluded
from the statement of cash flows. Such transactions
shall be disclosed elsewhere in the financial
statements either in the notes to financial statements
or in a separate schedule or in a way that provides all
relevant information about these transactions. The
statement of cash flows is strictly a cash concept.
Examples are as follows:
a) Acquisition of asset by assuming directly related
liability
b) Acquisition of asset by issuing share capital
c) Acquisition of assets by issuing bonds payable
d) Conversion of bonds payable into share capital
e) Conversion of preference shares into ordinary
share

E. Interest
PAS 7, paragraph 33, provides that interest paid and
interest received shall be classified as operating cash
flows because they enter into the determination of
net income or loss. Interest paid may be classified as
financing cash flow because it is a cost of obtaining
financing resources. While, interest received may be
classified as investing cash flow because it is a return
on investment. For a financial institution, interest
paid and interest received are usually classified as
operating cash flows.

F. Dividends
PAS 7, paragraph 33, provides that dividend received
shall be classified as operating cash flow because it
enters into the determination of net income.
Dividend received may be classified as investing cash
flow because it is a return on investment. PAS 7,
paragraph 34, provides that dividend paid shall be
classified as financing cash flows because it is a cost
of obtaining financial resources. Dividend paid may
be classified as operating cash flow in order to assist
users to determine the ability of the entity to pay
dividends out of operating cash flows.

G. Income taxes

============================================================================================
Page 2 of 2