PAS 7

• What is PAS 7?

  Statement of Cash Flows
• Statement of Cash Flows


  Provides information about the sources and utilization of cash and cash equivalents during the period.
• Cash


  It comprises of cash on hand and cash in bank.
• Cash equivalents 


  Are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in values.
• Only debt instruments acquired within 3 months or less before their maturity date can qualify as cash equivalents.
• What are the examples of cash equivalents?

  1 year treasury bills, 90 day money market instrument or commercial paper, and 3 month time deposit
• Cash flows 


  Includes inflows and outflows of cash and cash equivalents.
• The statement of cash flows help users assess:

  1. The ability of the entity to generate cash and cash equivalents.
  2. The timing and certainty of the generation of cash flows, and
  3. The needs of the entity to utilize those cash flows.
• Under a cash basis, it enhances inter-comparability, while under an accrual basis, it leads to negative cash flows.
• What are the classifications of cash flows?

  1. Operating activities
  2. Investing activities
  3. Financing activities
• Operating activities

  • Cash flows are primarily derived from the principal revenue-producing activities of the entity.
  • Includes cash inflows and outflows on items of income and expenses, or those that enter into the determination of profit or loss.
• What are the examples of cash flows from operating activities?

  1. Cash receipts from the sale of goods, rendering of services, or other forms of income.
  2. Cash payments for purchases of goods and services.
  3. Cash payments for operating expenses: employee benefits, insurance, and payments or refunds of income taxes