statement of cash flows

Cash flow statements -

The path we will walk

This is a view – not adviceDisclaimer:The information in this presentation is of a general nature only and does not take into account your personal objectives, financial situation or needs. It is not intended to be, and should not be construed in any way as, investment, legal or financial advice.Please consider the information educational – the intent is the share some thoughts about cash flow that may be of value to a fellow member of ASAThe information is considered accurate, however the analysis can be challenged, and I hope you do during the discussion part of the presentation.Information has been obtained from annual reports publicly available on company websites - web links are in the reference section at the end of the presentationI am not in any way qualified to provide financial advice – this presentation is about sharing information that may help you as an investor.Please consult your own personal adviser when making investment decisions.

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Technical definitions

Linkage between balance sheet, profit and loss and cash flow

Cash flow statement

Operating

Financing

investing

Statement of financial performance – (profit and loss)

Statement of financial position – (balance sheet)

AccountingGAAP – Generally accepted accounting principles (US GAAP)

IFRS - International Financial Reporting Standards (generally used in Australian accounts)

IIRC – International Integrated Reporting Council

Sets of rules that govern how reports are prepared – have a look through the notes!

Resource PWC IFRS and US GAAP: similarities and differences — 2016 edition

http://tinyurl.com/p9tw3x7 Pro forma – non standard accounting information – (Peter Morgan observation in AFR)

Just know there can be differences

Composition of cash flow statement

• Operating cash• Financing activities• Investing activities

Operating cash

“Cash flows from operating activities are primarily derived from the principal revenue-producing activities of the entity. Therefore, they generally result from the transactions and other events that enter into the determination of profit or loss” AASB107 (Para 14)

Revenue Cash collected Expenses Cash paid

Investing

“The separate disclosure of cash flows arising from investing activities is important because the cash flows represent the extent to which expenditures have been made for resources intended to generate future income and cash flows. Only expenditures that result in a recognised asset in the statement of financial position are eligible for classification as investing activities” AASB107 (Para 16)

Non-current assets Intangible assets

Financing“The separate disclosure of cash flows arising from financing activities is important because it is useful in predicting claims on future cash flows by providers of capital to the entity” AASB107 (para17)

Debt Dividend Interest (received and paid)

So – what does this look like in the reports we receive as investors?

WB page 1WB page 2

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Aconex

Work book page 7Work book page 8

Bellamy’s WB Page 10

Bellamy’s

Looking for $1,651 from cashFlow statement. Close but why the difference?

Bellamy’s

Bellamy’s

Bellamy’s

Bellamy’sWB page 13 WB page 7

Bellamy’s

The green highlightedNumbers add up to$190,809

WB page 7

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Integrated Research

Declaration ofinterest

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Integrated ResearchWB page 16

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Integrated Research

Integrated Research

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Integrated Research

Declaration of interest

Wesfarmers

Wesfarmers WB page 24

WesfarmersWB page 25

Wesfarmers

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Wesfarmers

Wesfarmers

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Wesfarmers

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Challenge - Areas to consider• Accounting treatment• Layout of reports• Look for where the cash is• Investment horizon• Dividends• Look at notes – ask questions – send queries to

company monitors

Common themes• Revenue flow to operating cash• Dividends• Gearing – debt load• Investment for the future

References• Cash Flow Analysis and Forecasting: The Definitive Guide to Understanding and Using

Published Cash Flow Data By: Timothy Jury Publisher: John Wiley & Sons Pub. Date: May 8, 2012

• Bookkeeping and Accounts for Entrepreneurs By Martin Quinn Publisher Prentice Hall Business Pub Date 10 Jan 2011

• AASB 107 Statement of Cash Flows• The Australian Financial Review• Integrated Reporting http://integratedreporting.org/ • Aconex Ltd 2016 Annual Report

http://investor.aconex.com/results-reports/?page=annual-reports • Bellamy’s Australia Ltd. 2016 Annual Report

http://investors.bellamysorganic.com.au/reports • Integrated Research Ltd 2016 Annual Report

http://www.ir.com/investors/asx-announcements • Wesfarmers Ltd 2016 Annual Report http://www.wesfarmers.com.au/investor-centre