A short discussion on IAS 7 Statement of cash flows for Unisa students (FAC4862 and FAC4864)

1. CASH FLOW
STATEMENTS
FAC 4862 & FAC 4864
Department of Financial Accounting

2. CASH FLOW STATEMENTS
Cash flows are classified by :
 Operating activities Revenue producing activities
Acquisitions and disposals of
 Investing activities long-term assets
Change in size or composition of
 Financing activities equity or borrowings
Interest received and dividends
Interest paid and dividends paid
received
FINANCINGACTIVITY or
INVESTING ACTIVITY or
OPERATING ACTIVITY
OPERATING ACTIVITY

3. CONSOLIDATED CASH FLOW
STATEMENTS
Use the
CONSOLIDATED P/L and CONSOLIDATED SFP
The following issues are unique to CONSOLIDATED
statement of cash flow:
•Dividends received from associates and joint ventures
•Acquisitions and disposals of associates and joint
ventures
•Dividends paid to non-controlling shareholders
•Acquisition and disposal of subsidiaries
•Share issues and share buy backs by subsidiaries
•Foreign operations

4. CONSOLIDATED CASH FLOW
STATEMENTS
INVESTMENT in Associate or JV:
Cash paid for the investment = Investing activity
TOTAL DISPOSAL of Associate or JV:
Proceeds from disposal of investment = Investing activity
Eliminate gain/loss from operating activities
PART DISPOSAL of Associate or JV (significant control/joint control is
LOST):
Proceeds from disposal of investment = Investing activity
Eliminate gain/loss from operating activities
PART DISPOSAL of Associate or JV (still has significant control/joint
control):
Proceeds from disposal of investment = Investing activity
Eliminate gain/loss from operating activities
Eliminate fair value adjustment of remaining investment from operating
activities
NB! Calculate dividends
DIVIDENDS received from Associate or JV: received by analysing the
Disclose as operating or investing activity Investment in ASS/JV account
in SFP

5. CONSOLIDATED CASH FLOW
STATEMENTS
Interest in subsidiary remains UNCHANGED
(nothing new, only watch out for dividends from subs)
ACQUISITION of subsidiary
Investment in sub = Investing activity (net of cash acquired)
Eliminate increase in assets and liabilities relating to the acquisition
DEBTORS
Opening balance (excl sub) 70 Closing balance (incl
sub) 100
Debtors of sub acquired 10 Cash receipts
30
Sales (parent + sub from a. date) 50
130 130
Acquiring ADDITIONAL interest = Financing activity
NB! Consideration paid by issuing shares:
Only the sub’s cash is reported as an investing activity in the consolidated
statement of cash flow

6. CONSOLIDATED CASH FLOW
STATEMENTS
DISPOSAL of subsidiary
Disposal of sub = Investing activity (net of cash of subsidiary)
Eliminate decrease in assets and liabilities relating to the acquisition
DEBTORS
Opening balance (incl sub) 80 Closing balance (excl sub)
90
Sales (parent + sub up to d.date) 50 Disposal of sub
10
Cash receipts
30
130 130
PART DISPOSAL of subsidiary (control is not lost) = FINANCING activity

7. CONSOLIDATED CASH FLOW
STATEMENTS
Notes of the acquisition or disposal of a subsidiary to the statement of cash
flow
ACQUISITION OF SUB DISPOSAL OF SUB
During the year the group acquired an Note:
80% interest in Subsidiary X. The FV of During the year the group disposed of
net assets acquired were as follows: an 80% interest in Subsidiary X. The FV
of net assets disposed of were as
PPE 280 follows:
Debtors 10
Cash 100 PPE 280
Creditors (90) Debtors 10
Net assets acquired 300 Cash 100
NCI (300 X 20%) (60) Creditors (90)
Goodwill (400+60 -300) Net assets disposed of 300
160 NCI (300 X 20%) (60)
Total consideration 400 Proceeds Goodwill (400+60 -300)
420
Less cash of subsidiary Share of Net assets 160
(10) (240) Gain on disposal 20
Net cash inflow 390 Goodwill (160)
Gain
Total proceeds
20
420
Less cash of subsidiary
(10)

8. CONSOLIDATED CASH FLOW
STATEMENTS
OTHER MATTERS
DIVIDENDS PAID BY SUBSIDIARY:
Dividends paid by subsidiaries to non-controlling shareholders should be
included in the consolidated statement of cash flows.
Non- controlling interest
Closing balance 600 Opening balance 500
Dividends declared 15 Interest in total comprehensive
income 115
(balancing)
615 615
DISCONTINUED OPERATIONS (not for FAC 4862):
Disclosure of net cash flows of discontinued operations in the notes of face of
statement of cash flows
FOREIGN OPERATIONS (not for FAC 4862):
Cash flow items: Translate at exchange rate date of transaction
P/L items: Translate average exchange rate