ACCCOB2 Chapter 11 - Corporations: Financial Statements

Financial Performance Statements

The standard allows the preparation of two separate statements to present the performance of an entity:

1) Income Statement (Statement of Profit/Loss)

2) State of Comprehensive Income

Statement of Cash Flows (SCF)

PAS 7 prescribes the preparation and presentation of the SCF. The standard allows two methods of presenting the contents of the statement:

1) Direct method

2) Indirect method

* Investing and Financing activities are the SAME for both methods

Classification of cash flows - Operating activities

These are cash flows that involve:

1) Income Statement accounts (revenue and expenses)

2) Current assets

3) Short-term investments (trading securities)

4) Current liabilities

Classification of cash flows - Investing activities

These are cash flows that involve:

1) Non-current assets (long-term investment and fixed assets accounts)

2) Loans to other entities and collections of such loans, EXCEPT for entities involved in loaning operations (banks)

Classification of cash flows - Financing activities

These are cash flows that involve:

1) Obtaining loans from banks and repaying the principal plus interest

2) Transactions involving equity accounts

3) For non-corporate entities, the additional investments and withdrawals by owners or partners