CASH FLOW STATEMENTS FAC 4862 & FAC 4864

CASH FLOW STATEMENTSFAC 4862 & FAC 4864Department of Financial Accounting

CASH FLOW STATEMENTSOperating activities

Investing activities

Financing activitiesCash flows are classified by :Revenue producing activitiesAcquisitions and disposals of long-term assetsChange in size or composition of equity or borrowingsInterest received and dividends receivedINVESTING ACTIVITY or OPERATING ACTIVITYInterest paid and dividends paidFINANCINGACTIVITY or OPERATING ACTIVITY

CONSOLIDATED CASH FLOW STATEMENTSUse the CONSOLIDATED P/L and CONSOLIDATED SFP The following issues are unique to CONSOLIDATED statement of cash flow:

Dividends received from associates and joint venturesAcquisitions and disposals of associates and joint venturesDividends paid to non-controlling shareholdersAcquisition and disposal of subsidiariesShare issues and share buy backs by subsidiariesForeign operations

CONSOLIDATED CASH FLOW STATEMENTSINVESTMENT in Associate or JV:Cash paid for the investment = Investing activityTOTAL DISPOSAL of Associate or JV:Proceeds from disposal of investment = Investing activityEliminate gain/loss from operating activities PART DISPOSAL of Associate or JV (significant control/joint control is LOST):Proceeds from disposal of investment = Investing activityEliminate gain/loss from operating activities

PART DISPOSAL of Associate or JV (still has significant control/joint control):Proceeds from disposal of investment = Investing activityEliminate gain/loss from operating activities Eliminate fair value adjustment of remaining investment from operating activities

DIVIDENDS received from Associate or JV:Disclose as operating or investing activityAssociates and JVsNB! Calculate dividends received by analysing the Investment in ASS/JV account in SFP

CONSOLIDATED CASH FLOW STATEMENTSSubsidiariesInterest in subsidiary remains UNCHANGED(nothing new, only watch out for dividends from subs)ACQUISITION of subsidiary Investment in sub = Investing activity (net of cash acquired)Eliminate increase in assets and liabilities relating to the acquisitionDEBTORSOpening balance (excl sub) 70 Closing balance (incl sub) 100Debtors of sub acquired 10 Cash receipts 30Sales (parent + sub from a. date) 50 130 130NB! Consideration paid by issuing shares: Only the subs cash is reported as an investing activity in the consolidated statement of cash flowAcquiring ADDITIONAL interest = Financing activity

CONSOLIDATED CASH FLOW STATEMENTSSubsidiariesDISPOSAL of subsidiary Disposal of sub = Investing activity (net of cash of subsidiary)Eliminate decrease in assets and liabilities relating to the acquisitionDEBTORSOpening balance (incl sub) 80 Closing balance (excl sub) 90Sales (parent + sub up to d.date) 50 Disposal of sub 10 Cash receipts 30 130 130PART DISPOSAL of subsidiary (control is not lost) = FINANCING activity

CONSOLIDATED CASH FLOW STATEMENTSSubsidiariesACQUISITION OF SUBDISPOSAL OF SUBNotes of the acquisition or disposal of a subsidiary to the statement of cash flowDuring the year the group acquired an 80% interest in Subsidiary X. The FV of net assets acquired were as follows:

PPE280Debtors 10Cash100Creditors (90)Net assets acquired 300NCI (300 X 20%)(60)Goodwill (400+60 -300) 160Total consideration 400Less cash of subsidiary (10)Net cash inflow390Note:During the year the group disposed of an 80% interest in Subsidiary X. The FV of net assets disposed of were as follows:

PPE280Debtors 10Cash100Creditors (90)Net assets disposed of 300NCI (300 X 20%)(60)Goodwill (400+60 -300) 160Gain on disposal 20 Total proceeds420Less cash of subsidiary (10)Net cash inflow410

Proceeds 420Share of Net assets (240)Goodwill (160)Gain 20

CONSOLIDATED CASH FLOW STATEMENTSOTHER MATTERSFOREIGN OPERATIONS (not for FAC 4862): Cash flow items: Translate at exchange rate date of transactionP/L items: Translate average exchange rate DISCONTINUED OPERATIONS (not for FAC 4862): Disclosure of net cash flows of discontinued operations in the notes of face of statement of cash flowsDIVIDENDS PAID BY SUBSIDIARY: Dividends paid by subsidiaries to non-controlling shareholders should be included in the consolidated statement of cash flows.Non- controlling interest Closing balance 600Opening balance500Dividends declared15Interest in total comprehensive income115(balancing)615615