CASH FLOW STATEMENT CASH FLOW STATEMENT ( AS-3)( AS-3)

It is an additional information to user It is an additional information to user of financial statement.of financial statement.

Exhibits flow of incoming and outgoing Exhibits flow of incoming and outgoing CashCash

Assesses ability of the enterprise to Assesses ability of the enterprise to generate cash and utilize the same.generate cash and utilize the same.

A tool for assessing liquidity and A tool for assessing liquidity and solvency of the enterprise.solvency of the enterprise.

CASH FLOW STATEMENT CASH FLOW STATEMENT ( AS-3)( AS-3)• Applies to:-Applies to:-• Enterprises with turnover of more than Rs. 50 Enterprises with turnover of more than Rs. 50

crores in a financial year.crores in a financial year.• Listed companies- to be presented under the Listed companies- to be presented under the

Indirect Method.Indirect Method.• Under Direct Method- cash inflows and outflows is Under Direct Method- cash inflows and outflows is

directly stated under the three headsdirectly stated under the three heads• Under Indirect Method- Cash flow from operating Under Indirect Method- Cash flow from operating

activities is arrived at by taking Net profit and activities is arrived at by taking Net profit and adding back non-cash exp./losses and adjusting for adding back non-cash exp./losses and adjusting for working capital to find cash generated from working capital to find cash generated from operations.operations.

CASH FLOW STATEMENT ( AS-CASH FLOW STATEMENT ( AS-3)3)• Cash Movements under different heads:-Cash Movements under different heads:-

– Operating activitiesOperating activities– Investing activities( cash from fixed assets, debt Investing activities( cash from fixed assets, debt

and equity instruments-acquired or disposed)and equity instruments-acquired or disposed)– Financing activities( cash from debt & equity flows Financing activities( cash from debt & equity flows

and dividend/interest paid thereon.)and dividend/interest paid thereon.)Sum of these three reflect net increase or decrease Sum of these three reflect net increase or decrease

in cash or cash equivalentin cash or cash equivalentCashCash: consists of cash in hand and demand deposits: consists of cash in hand and demand depositsCash equivalent:Cash equivalent: consists of short term highly liquid consists of short term highly liquid

investments with maturity of less than 3 months.investments with maturity of less than 3 months.

CASH FLOW STATEMENT ( AS-CASH FLOW STATEMENT ( AS-3)3)

• Care:-Care:-– Interest recd. From investment is an inflow in Interest recd. From investment is an inflow in

investment activityinvestment activity– Interest received from short term Interest received from short term

investments( upto 90 days)-inflow from investments( upto 90 days)-inflow from operating activityoperating activity

– Interest paid on loans/debts is inflow from Interest paid on loans/debts is inflow from financing activityfinancing activity

– Interest on working capital loan is inflow from Interest on working capital loan is inflow from operating activity.operating activity.

CASH FLOW STATEMENT ( AS-CASH FLOW STATEMENT ( AS-3)3)• Care: Dividend recd for Financial Care: Dividend recd for Financial

enterprises is inflow in operating activityenterprises is inflow in operating activity• For other than financial enterprises it is For other than financial enterprises it is

inflow from Investing activity.inflow from Investing activity.• Dividend paid is always classified as Dividend paid is always classified as

financing activityfinancing activity• Effect due to changes in exchange rates to Effect due to changes in exchange rates to

be shown separately as reconciliation.be shown separately as reconciliation.• Unrealised gains/losses from changes in Unrealised gains/losses from changes in

exchange rates are not cash flows.exchange rates are not cash flows.

LIFE CYCLE CASH FLOW IMPACTLIFE CYCLE CASH FLOW IMPACT