Please provide summary on Ind AS 7 - Statement of Cash Flows
Please provide summary on Ind AS 7 - Statement of Cash Flows Information about the cash flows of an entity is useful in providing users of financial statements with a basis to assess the ability of the entity to generate cash and cash equivalents and the needs of the entity to utilise those cash flows. The economic decisions that are taken by users require an evaluation of the ability of an entity to generate cash and cash equivalents and the timing and certainty of their generation. The objective of this Standard is to require the provision of information about the historical changes in cash and cash equivalents of an entity by means of a statement of cash flows which classifies cash flows during the period from operating, investing and financing activities. An entity shall prepare a statement of cash flows in accordance with the requirements of this Standard and shall present it as an integral part of its financial statements for each period for which financial statements are presented. Users of an entity’s financial statements are interested in how the entity generates and uses cash and cash equivalents. This is the case regardless of the nature of the entity’s activities and irrespective of whether cash can be viewed as the product of the entity, as may be the case with a financial institution. Entities need cash for essentially the same reasons however different their principal revenue-producing activities might be. They need cash to conduct their operations, to pay their obligations, and to provide returns to their investors. Accordingly, this Standard requires all entities to present a statement of cash flows.
Dear Friend > Ind AS 7 - Statement of Cash Flows The statement of cash flows (cash flow statement) is one of the primary statements in financial reporting (along with the statement of profit and loss, the balance sheet and the statement of changes in equity). It presents the generation and use of ‘cash and cash equivalents’ by category (operating, investing and finance) over a specific period of time. It provides users with a basis to assess the entity’s ability to generate and utilise its cash. Operating activities are the entity’s revenue-producing activities. Investing activities are the acquisition and disposal of long-term assets (including business combinations) and investments that are not cash equivalents. Financing activities are the changes in equity and borrowings. Management may present operating cash flows by using either the direct method (gross cash receipts/payments) or the indirect method (adjusting net profit or loss for non-operating and non-cash transactions, and for changes in working capital). Cash flows from investing and financing activities are reported gross separately (that is, gross cash receipts and gross cash payments) unless they meet certain specified criteria. Interest paid and interest and dividends received are classified as financing cash flows and investing cash flows respectively. This is because they are costs of obtaining financial resources or returns on investments. Dividends paid should be classified as cash flows from financing activities because they are costs of obtaining financial resources. Cash flows relating to taxation on income are classified and separately disclosed under operating activities unless they can be specifically attributed to investing or financing activities. The total that summarises the effect of the operating, investing and financing cash flows is the movement in the balance of cash and cash equivalents for the period. Bank borrowings are generally considered as financing activities. However, bank overdrafts, which are repayable on demand form an integral part of an entity’s cash management, are included as a component of cash and cash equivalents. Separate disclosure is made of significant non-cash transactions (such as the issue of equity for the acquisition of a subsidiary or the acquisition of an asset through a finance lease). Non-cash transactions include impairment losses/reversals, depreciation, amortisation, fair value gains/losses and income statement charges for provisions. Thanks