ࡱ > R F bjbjVV EL < < m 1 n n n n n 8 D % ( " 8 8 8 l l l $ $ $ $ $ $ $ $ ?' ) | $ ] n l l l l l $ n n 8 8 4 Q% l Z n 8 n 8 $ l $ # | R$ 8 Ƙk .$ $ g% 0 % @$ ]* L 6 ]* $ R$ ]* n R$ h l l l l l l l $ $ l l l % l l l l ]* l l l l l l l l l 4 : Chapter 22 Statement of Cash Flows 1. Objectives 1.1 Explain the purpose of preparing a statement of cash flows. 1.2 Define cash, cash equivalents and cash flows. 1.3 Evaluate the usefulness of a statement of cash flows. 1.4 Prepare a statement of cash flows with supporting notes in the format as specified in HKAS 7. 1.5 Classify and report inflows and outflows of cash and cash equivalents under the standard headings: (i) operating activities (ii) investing activities (iii) financing activities. 1.6 Prepare statement of cash flows for a single company using the direct and indirect methods. EMBED OrgPlusWOPX.4 2. Introduction 2.1 Neither the statement of comprehensive income nor the statement of financial position provides sufficient information about the entitys inflows and outflows of cash and cash equivalents. 2.2 The objective of the standard is to require reporting entities which fall within its scope to prepare a cash flow statement as part of their financial statements setting out on a standard basis their cash generation and absorption for a period. 2.3 The purposes of preparing a statement of cash flows are as follows: (i) Proper management cash flow is essential to the survival of an enterprise, and accordingly, the reporting of cash flow information would be helpful to the users of financial statements in assessing the liquidity of the enterprise. (ii) The statement of comprehensive income and the statement of financial position, which are prepared using accruals accounting, form a primary basis to project the future cash flows of an entity. The aim of statement of cash flows is to eliminate the long-term provisions and other allocations associated with accrual accounting and to depict the historical cash generating or cash absorption mechanisms of an entity. The cash flow statement, in conjunction with a statement of comprehensive income and a statement of financial position provides information on liquidity, validity and financial adaptability. 2.4 All entities that adopt HKFRSs will now be required to prepare a statement of cash flows in accordance with HKAS 7 and to present it as an integral part of their financial statements for each period for which financial statements are presented. 2.5 This means that the following exemptions included in SSAP 15 will no longer be available: (i) certain entities with revenue of less than HK$ 20 million per annum; and (ii) charities and non-profit making entities whose financial statements are prepared on a cash basis. 2.6 The standard applies to all financial statements intended to give a true and fair view of the financial position and profit and loss except for the following: (i) Companies are exempt under s. 141D of the Companies Ordinance and are therefore exempt from the requirement to give a true and fair view in their financial statements. (ii) Banking and insurance companies which take advantage of exemptions under Part III of the Tenth Schedule to the Companies Ordinance. (iii) Charities and non-profit making entities whose accounts are prepared on a cash basis. 3. Definition of Terms 3.1DEFINITIONS(a) Cash Cash in hand and deposits repayable on demand with any bank or other financial institutions. These include cash in hand and deposits denominated in foreign currencies. (b) Cash equivalent ( sёI{