IAS 7 STATEMENT= OF CASH FLOWS
HISTORY OF IAS = 7
June 1976	Exposure Draft E7 Statement of Source and Application of Funds
October 1977	IAS 7 Statement of Changes in Financial Position
July 1991	Exposure Draft E36 Cash Flow Statements<= /span>
December 1992	IAS 7 (1992) Cash Flow Statements=
1 January 1994	Effective Date of IAS 7 (1992)
6 September 2007	Retitled from Cash F= low Statements to Statement of Cash Flows as a consequential amendment resulting from revisions to IAS 1=
RELATED INTERPRETATIONS
Issues Re= lating to This Standard that IFRIC Did Not Add to Its Agenda

SUMMARY OF IAS = 7

Objective of IAS 7<= span style=3D'font-size:9.0pt;font-family:Arial;color:black'>

The objective of IAS 7 is to require the presentation of information about = the historical changes in cash and cash equivalents of an enterprise by mea= ns of a statement of cash flows, which classifies cash flows during the pe= riod according to operating, investing, and financing activities.

Fundamental Principle in IAS 7<= /span>

All enterprises that prepare financial statements in conformity with IFRSs are required to present a statement of cash flows. [IAS 7.1]

The statement of cash flows analyses changes in cash and cash equivalents during a period. Cash and cash equivalents comprise cash on hand and de= mand deposits, together with short-term, highly liquid investments that are readily convertible to a known amount of cash, and that are subject to an insignificant risk of changes in value. Guidance notes indicate that an investment normally meets the definition of a ca= sh equivalent when it has a maturity of three months or less from the date= of acquisition. Equity investments are normally excluded, unless they are = in substance a cash equivalent (e.g. preferred shares acquired within three months of their specified redemption date). Bank overdrafts which are repayable on demand and which form an integral part of an enterprise's = cash management are also included as a component of cash and cash equivalent= s. [IAS 7.7-8]

Presentation of the Statement o= f Cash Flows

Cash f= lows must be analysed between operating, investi= ng and financing activities. [IAS 7.10]

Key pr= inciples specified by IAS 7 for the preparation of a statement of cash flows are= as follows:

operating activities are the main revenue-producing activities of the enterprise that are not invest= ing or financing activities, so operating cash flows include cash rece= ived from customers and cash paid to suppliers and employees [IAS 7.14]=
investing activities are the acquisition a= nd disposal of long-term assets and other investments that are not considered to be cash equivalents [IAS 7.6]
financing activities are activities that a= lter the equity capital and borrowing structure of the enterprise [IAS = 7.6]
interest and dividends received and paid may be classified as operating, investing, or financing cash flows, provided that they are classified consistent= ly from period to period [IAS 7.31]
cash flows arising from taxes on income are normally classified as operating, unless they = can be specifically identified with financing or investing activities = [IAS 7.35]
for operating cash flo= ws, the direct method of presentation is encouraged, but the indirect method is acceptable [IAS 7.18]

The direct method shows each major class of gross c= ash receipts and gross cash payments. The operating cash flows section of t= he statement of cash flows under the direct method would appear something = like this:

Cash receipts from customers	xx,xxx
Cash paid to suppliers	xx,xxx
Cash paid to employees	xx,xxx
Cash paid for other operating expenses	xx,xxx
Interest paid	xx,xxx
Income taxes paid	xx,xxx
Net cash from operating activities <= /span>	xx,xxx

The indirect method adjusts accrual basis net profi= t or loss for the effects of non-cash transactions. The operating cash flows section of the statement of cash flows under the indirect method would appear something like this:

Profit before interest and income taxes		xx,xxx
Add back depreciation		xx,xxx
Add back amortisation of goo= dwill		xx,xxx
Increase in receivables		xx,xxx
Decrease in inventories		xx,xxx
Increase in trade payables		xx,xxx
Interest expense	xx,xxx<TD&NB= SP;< TD>
Less Interest accrued but not yet paid	xx,xxx
Interest paid		xx,xxx
Income taxes paid		xx,xxx
Net cash from operating activities <= /span>		xx,xxx

cash flows relating to extraordinary items should be classified as operating, investing or financing as appropriate and should be separately disclosed [IAS 7= .29]
the exchange rate used= for translation of transactions denominated in a foreign currency and = the cash flows of a foreign subsidiary should be the rate in effect at= the date of the cash flows [IAS 7.25]
cash flows of foreign subsidiaries should be translated at the exchange rates prevailing when the cash flows took place [IAS 7.26]
as regards the cash fl= ows of associates and joint ventures, where the equity method is used, th= e statementof cash flows should report only ca= sh flows between the investor and the investee; where proportionate consolidation is used, the cash flow statement should include the venturer's share of= the cash flows of the investee [IAS 7.37-3= 8]
aggregate cash flows relating to acquisitions and disposals of subsidiaries and other business units should be presented separately and classified as investing activit= ies, with specified additional disclosures. The aggregate cash paid or received as consideration should be reported net of cash and cash equivalents acquired or disposed of [IAS 7.39] <= /li>
cash flows from invest= ing and financing activities should be reported gross by major class of cash receipts and major class of cash payments except for the following cases, which may be reported on a net basis: [IAS 7.22-2= 4]

cash receipts and pay= ments on behalf of customers (for example, receipt and repayment of dem= and deposits by banks, and receipts collected on behalf of and paid o= ver to the owner of a property)
cash receipts and pay= ments for items in which the turnover is quick, the amounts are large, = and the maturities are short, generally less than three months (for example, charges and collections from credit card customers, and purchase and sale of investments)
cash receipts and pay= ments relating to fixed maturity deposits
cash advances and loa= ns made to customers and repayments thereof

investing and financing transactions which do not require the use of cash should be exclud= ed from the statementof cash flows, but t= hey should be separately disclosed elsewhere in the financial statemen= ts [IAS 7.43]
the components of cash= and cash equivalents should be disclosed, and a reconciliation present= ed to amounts reported in the statement of financial position [IAS 7.= 45]
the amount of cash and= cash equivalents held by the enterprise that is not available for use by the group should be disclosed, together with a commentary by management [IAS 7.48]