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Educational Material on Ind AS 7 Statement of Cash Flows

Educational Material on Ind AS 7 Statement of Cash Flows

Ind AS 7 Statement of Cash Flows : Ind AS 7 prescribes the requirements for preparation of statement of cash flows which shall be presented as an integral part of the financial statements. This Standard prescribes principles and guidance on preparation and presentation of cash flows of an entity from operating activities, investing activities and financing activities for a reporting period. Information on cash flows is useful in assessing the ability of an entity to generate cash and cash equivalents and the needs of the entity to utilise those cash flows. AS 7 Statement of Cash Flows requires an entity to present a statement of cash flows as an integral part of its primary financial statements. Cash flows are classified and presented into operating activities (either using the ‘direct’ or ‘indirect’ method), investing activities or financing activities, with the latter two categories generally presented on a gross basis.

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Educational Material on Ind AS 7 Statement of Cash Flows

Ind AS 7 Statement of Cash Flows : This module, updated in January 2013, focuses on the requirements for the presentation of the statement of cash flows in accordance with Section 7 Statement of Cash Flows of the IFRS for SMEs that was issued in July 2009 and the related non-mandatory guidance subsequently provided by the IFRS Foundation SME Implementation Group.. Section 3 Financial Statement Presentation sets out general presentation requirements and Sections 4–8 focus on the requirements for presenting the individual statements that together comprise a complete set of financial statements.

Definition of  Statement of Cash Flows

A summary of the actual or anticipated incoming and outgoings of cash in a firm over an accounting period (month, quarter, year). It answers the questions , where the money came (will come) from?, where it went (will go)?. This cash flow statements assess the amount, timing, and predictability of cash-inflows and cash-outflows, and are used as the basis for budgeting and business-planning. The accounting data is presented usually in three main sections those are Operating-activities (sales of goods or services), Investing-activities (sale or purchase of an asset, for example), and Financing-activities (borrowings, or sale of common stock, for example).


1. Information about the cash flows of an enterprise is useful in providing users of financial statements with a basis to assess the ability of the enterprise to generate cash and cash equivalents and the needs of the enterprise to utilise those cash flows.

2. The Standard deals with the provision of information about the historical changes in cash and cash equivalents of an enterprise by means of a cash flow statement which classifies cash flows during the period from operating, investing and financing activities.


1. An enterprise should prepare a cash flow statement and should present it for each period for which financial statements are presented.

2. Users of an enterprise’s financial statements are interested in how the enterprise generates and uses cash and cash equivalents. This is the case regardless of the nature of the enterprise’s activities and irrespective of whether cash can be viewed as the product of the enterprise, as may be the case with a financial enterprise.

Benefits of Cash Flow Information

1. A cash flow statement, when used in conjunction with the other financial statements, provides information that enables users to evaluate the changes in net assets of an enterprise, its financial structure (including its liquidity and solvency) and its ability to affect the amounts and timing of cash flows in order to adapt to changing circumstances and opportunities.

2. Historical cash flow information is often used as an indicator of the amount, timing and certainty of future cash flows. It is also useful in checking the accuracy of past assessments of future cash flows and in examining the relationship between profitability and net cash flow and the impact of changing prices.

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Educational Material on Ind AS 7 Statement of Cash Flows

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Educational Material on Ind AS 7 Statement of Cash Flows

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