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Section 2140: Statement of Cash Flows
[U.S. GAAP Codification Topic]
230 Statement of cash flows
230-10 Overall
[U.S. GAAP before the Codification]
SFAS 95, November 1987, Statement of Cash Flows
SFAS 102, February 1989, Statement of Cash Flows-Exemption of Certain Enterprises and Classification of Cash Flows from Certain Securities Acquired for Resale, an amendment of FASB Statement No. 95
SFAS 104, December 1989, Statement of Cash Flows-Net Reporting of Certain Cash Receipts and Cash Payments and Classification of Cash Flows from Hedging Transactions, an amendment of FASB Statement No. 95
1. Presentation of Cash Flows
(1) Statement of cash flows reports (A) by (B)
--> (A) net cash provided or used
--> (B) operating, investing and financing activities
(2) For operating activities, (C) is required to be presented
--> (C) Reconciliation of net income and net cash flow
(3) Presentation of "Cash Flow per Share" is not allowed
2. Types of Activities
(1) Operating activities
(2) Investing activities
(3) Financing activities
3. Operating Activities
(1) Cash received from sale of goods or services
(2) Cash paid to suppliers and employees
(3) Receipt of dividends
(4) Receipt of interests
(5) Payment of interests
(6) Receipt of insurance proceeds
(7) Income taxed paid
4. Investing Activities
(1) Acquisition of debt instruments of other entities
(2) Sale of debt instruments of other entities
(3) Acquisition of equity instruments of other entities
(4) Sale of equity instruments of other entities
(5) Acquisition of property, plant and equipment
(6) Sale of property, plant and equipment
(7) Capital expenditures
(8) Payment for purchase of another entity
5. Financing Activities
(1) Issuance of equity instruments
(2) Payment of dividends
(3) Repurchase of equity instruments
(4) Proceeds from short-term borrowings
(5) Repayment of short-term borrowings
(6) Proceeds from issuance of bonds and other long-term borrowings
(7) Repayment of bonds and other long-term borrowings
6. Reporting Operating Activities
(1) Direct method
(2) Indirect method
(3) Direct method is "encouraged"
7. Direct method reports (a), (b) and (c)
--> (a) major classes of gross cash receipts from operating activities
--> (b) major classes of gross cash payments for operating activities
--> (c) net cash flow from operating activities
8. Indirect method
Net cash from operating activities = Net income + (d)
--> (d) Adjustments from net income to net cash from operating activities
9. (d) includes the following:
(1) Add non-cash expenses
---> Example: depreciation and amortization
(2) Subtract gain on sale of property, plant and equipment
--> Gain on sale of property, plant and equipment is included
--> in cash flows form investing activities
(3) Decrease in non-cash current assets --> add
--> Example: collection of accounts receivable
--> decreases non-cash current assets, increases cash,
(4) Increase in current assets --> subtract
--> Example: purchase of inventories in cash
--> increases non-cash current assets, decreases cash
(5) Decrease in current liabilities --> subtract
--> Example: payment of accounts payable
--> decreases current liabilities, decreases cash
(6) Increase in current liabilities --> add
--> Example: increase in accounts payable
--> increases current liabilities, increases cash
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