IAS 7 &

IFRS 10
Group Statement of
Cash Flows 13
PURPOSE & SCOPE (Single Company) |1

The fundamental purpose of being in business is to generate profit, as this will

increase the owners' wealth. Profitability relates to the long term performance of
the business and indicates that over the long term a business will generate cash.
In the short term, the business' viability is determined by its ability to generate
Purpose cash. However as an statement of profit or loss is prepared on an accruals
basis, the profit for the year is unlikely to correlate with the movement in the
company's bank balance. Items such as depreciation, provision movements and
impairment of goodwill will mean that profits and cash flows may differ
dramatically.
Users need to know about the cash generating ability and financial adaptability
Users’ of an entity, i.e. can the business generate cash and can it alter the timing of its
needs cash flows. If the entity can answer positively, users will be confident about the
entity's prospects.
Therefore, IAS 7 requires that entities should prepare a statement of cash flows
Scope
as an integral component of financial statements.

DEFINITIONS

Cash comprises cash on hand and demand deposits.

Cash are short terms, highly liquid investments that are readily convertible to known
equivalent amounts of cash and which are subject to an insignificant risk of changes in
value.
Cash flows are inflows and outflows of cash and cash equivalents.
Operating are the principal revenue producing activities of the entity and other activities
activities that are not investing or financing activities.
Investing are the acquisition and disposal of long term assets and other investments not
activities included in cash equivalents.
Financing are activities that result in changes in the size and composition of the
activities contributed equity and borrowings of the entity.

CASH EQUIVALENT
An investment normally qualifies as a cash equivalent only when it has a
short maturity of, say, three months or less from the date of acquisition.
Investments Investment in equity shares is not included in cash and cash equivalents,
however, investment in redeemable shares may be included if specific
redemption date is very close.
If the balance of bank overdraft fluctuates normally from positive to negative
Bank or vice versa, it is included in cash and cash equivalent. However, if in
overdraft substance, the entity is using bank overdraft as short term loan, it should be
included in financing activities.
Movement Movement within cash and cash equivalent are not presented as cash flows.
 QUESTION 01
Calculate the cash and cash equivalents from the following information:
$
Cash in hand 200,000
Cash at bank 140,000
Short term investments (1 month) in government treasury bills 40,000
2| Trade debts 40,000
Investment in prize bonds 80,000
Other receivables 40,000
Bank overdraft 20,000

QUESTION 02
What would be the effect on statement of cash flows of the following transactions?
$
Cash deposited in bank account 100,000
Sale of prize bonds 500,000
Investment in treasury bills of government with 60 days maturity 800,000

PRESENTATION
The statement of cash flows shall report cash flows during the period classified by operating,
investing and financing activities.
They generally result from the transactions and other events that enter into the
determination of profit or loss. Examples of cash flows from operating activities
are:
(a) Cash receipts from the sale of goods and the rendering of services;
(b) Cash receipts from royalties, fees, commissions and other revenue;
(c) Cash payments of suppliers for goods and services;
Operating (d) Cash payments to and on behalf of employees;
Activities (e) Cash receipts and cash payments of an insurance;
(f) Cash payments or refunds of income taxes unless they can be
specially identified with financing and investing activities; and

Some transactions, such as the sale of an item of plant, may give rise to a gain
or loss which is included in the determination of profit or loss. However, the
cash flows relating to such transactions are cash flows from investing activities.
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. Examples of cash flows arising from investing activities are:
(a) Cash payments to acquire PPE, intangibles and other long-term assets
Investing
including development costs and self-constructed PPE.
Activities
(b) Cash receipts from sales of PPE, intangibles and other long-term
assets;
(c) Cash payments to acquire equity or debt instruments of other;
(d) Cash receipts from sales of equity or debt instruments of other entities;
(e) Cash advances and loans made to other parties.
The separate discloser 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. Examples of cash flows arising from financing
Financing
activities are:
Activities
(a) cash proceeds from issuing shares or other equity instruments;
(b) cash payment to owners to acquire or redeem the entity’s shares;
(c) cash proceed from issuing debentures, loans, notes, bonds, and other
 short or long term borrowings;
(d) cash repayment of amounts borrowed, and
(e) cash payments by lessee for liability under finance lease.

QUESTION 03
Identify the following transactions as operating, investing, financing or otherwise:
TRANSACTION ANSWER |3
1. Cash received from customers
2. Cash sales
3. Cash proceeds from disposal of PPE
4. Right issue of shares
5. Repayment of loan
6. Dividend received by stock market broker
7. Dividend paid
8. Salaries paid to employees
9. Interest on debentures paid
10. Interest received by a trading entity on some investment
11. Interest received by a bank on loans advanced
12. Taxes paid
13. Purchase of a patent and software
14. Advance paid to supplier
15. Depreciation
16. Bonus issue of shares
17. Impairment loss on a plant

REPORTING CASH FLOWS

OPERATING CASH FLOWS
An entity shall report cash flows from operating activities using either:
Direct whereby major classes of gross cash receipts and gross cash payments are
method disclosed; or
whereby profit or loss is adjusted for the effects of transactions of a non cash
Indirect nature, any deferrals or accruals of past or future operating cash receipts or
method payments, and items of income or expense associated with investing or
financing cash flows.

QUESTION 04
The following are extracts from the financial statements of Oxygen Limited for the year
ended June 30, 2012 and 2011.
2012 2011
SFP (extracts) $ $
Inventories 230,000 185,000
Prepayments 14,000 16,000
Trade receivables 52,000 30,000
Cash 15,000 38,000
Trade payables 39,000 44,000
Income tax payable 5,000 4,000
 SPL (extracts)
Revenue 500,000
Cost of sales (includes depreciation of $ 6,000) (310,000)
Gross profit 190,000
Operating expenses (includes depreciation of $ 6,000) (80,000)
Finance costs (21,000)
4| Profit before tax 89,000
Taxation (30,000)
Profit after tax 59,000

Required:
What will be the net cash flow from operating activities under:
(a) Indirect method
(b) Direct method

Investing and Financing Cash Flows

An entity shall report separately major classes of gross cash receipts and
Generally gross cash payments arising from investing and financing activities, except to
the extent that cash flows described as follows are reported on a net basis.
Cash flows arising from the following operating, investing or financing activities
may be reported on a net basis:
(a) cash receipts and payments on behalf of customers when the cash
On net
flows reflect the activities of the customer rather than those of the
basis
entity; and
(b) cash receipts and payments for items in which the turnover is quick, the
amounts are large, and the maturities are short.

QUESTION 05
The following are extracts from the financial statements of Nitrogen Limited for the year
ended June 30, 2012 and 2011.
2012 2011
SFP (extracts) $ $
Property, plant and equipment 850,000 800,000
Intangible assets 0 200,000

Share capital 600,000 500,000

Share premium 200,000 150,000
Long term loans 500,000 0
Debentures 100,000 400,000

Additional information:
During the year, right issue of shares was made.
Depreciation for the year was $ 200,000. There was no disposal of PPE during the year
Intangible asset (patent) was sold at beginning of the year equal to its carrying amount.

Required:
Present the above transactions in the statement of cash flows.
 QUESTION 06
The following information relates to running finance of ABC Limited.
$
Balance at beginning of month 47,000
Payments
6 January 10,000
18 January 25,000 |5
28 January 17,000 52,000

Receipts
2 January 7,000
14 January 18,000
26 January 30,000 55,000

Balance at end of month 44,000

Required:
How the above transactions should be treated in statement of cash flows.

INTEREST, DIVIDENDS AND TAXES ON INCOME

Interest paid and interest and dividends received are usually classified as
Classification operating cash flows for a financial institution. However, there is no
consensus on the classification of these cash flows for other entities.
Cash flows from interest and dividends received and paid shall each be
Consistency disclosed separately. Each shall be classified in a consistent manner from
period to period as operating, investing or financing activities.
Cash flows arising from taxes on income shall be separately disclosed and
Taxes shall be classified as cash flows from operating activities unless they can
be specifically identified with financing and investing activities.

NON CASH TRANSACTIONS

Investing and financing transaction that do not require the use of cash or
cash equivalent shall be excluded from a statement of cash flows. Such
Requirement transaction shall be disclosed elsewhere in the financial statements in a way
that provides all the relevant information about these investing and financing
activities.
 Gain on revaluation
 Assets acquired under finance lease
Examples  Depreciation, amortisation and impairment losses
 Bonus issue of shares
 Conversion of convertible bonds in shares

DISCLOSURE
Components An entity shall disclose the components of cash and cash equivalents and
of cash and shall present a reconciliation of the amounts in its statement of cash flows
cash with the equivalent items reported in the SFP.
equivalents
An entity shall disclose, together with a commentary by management, the
Other
amount of significant cash and cash equivalent balance held by the entity
disclosures
that are not available for use by the group.
 FORMAT AND GUIDANCE (Single Company)

[Entity Name]
Statement of cash flows For
the year ended [date here]

6| Cash flows from operating activities: <Direct method> $’000

Cash receipts from customers Note 1 XXX
Cash paid to suppliers, employees and for expenses Note 2 (XXX)
Cash generated from operations XXX
Interest paid (XX)
Pension benefits paid (XX)
Income tax paid (XX)
Net cash from (used in) operating activities A XXX

Cash flows from operating activities: <Indirect method> $’000

Profit before tax Note 3 XXX

Adjustments for: Note 4

[non-cash income and expenses included in SPL] XX/(XX)
[items of income and expenses relating to investing or
financing activity but included in SPL] XX/(XX)
[post-employment benefit expense, finance income and
expense] XX/(XX)
Operating profit before working capital changes XXX
[increase or decrease in current assets and liabilities] Note 5 XX/(XX)
Cash generated from operations XXX
Interest paid (XX)
Pension benefits paid (XX)
Income tax paid (XX)
Net cash from (used in) operating activities A XXX

Cash flows from investing activities:

Purchase of non-current assets or short term investment (XXX)
(on cash basis)
Disposal of non-current assets or short term investment XX
(on cash basis)
Investment income (on cash basis) XX
Net cash from (used in) investing activities B (XXX)

Cash flows from financing activities:

Cash proceeds from share issue, loan issue and borrowings XXX
Cash paid for share re-purchase, loan and borrowings repayment (XX)
Interest paid on borrowings/Dividend paid (XX)
Net cash from financing activities C XXX

Net decrease in cash and cash equivalents A+B+C XXX

Cash and cash equivalents at beginning of the year SFP XX
Cash and cash equivalents at end of the year SFP XX
NOTE 1
$
Revenue (Cash + Credit) XXX
(Increase)/decrease in trade receivables XX/(XX)
XXX

NOTE 2 |7
$
All expenses and incomes in SPL for profit before tax excluding revenue (XXX)
[non-cash income and expenses included in SPL] XX/(XX)
[items of income and expenses relating to investing or financing activity but
included in SPL] XX/(XX)
[post-employment benefit expense, finance income and expense] XX/(XX)
[increase on decrease in current assets and liabilities excluding trade XX/(XXX)
receivables]
(XXX)

NOTE 3
If profit in not given in the question (for indirect method), it is usually determined by
reconciling retained earnings. Profit before tax is to be taken for starting statement of cash
flows under indirect method.

NOTE 4
Expenses add back in profit
Incomes less back from profit

NOTE 5
Include increase/decrease in
 inventory,
 prepayments,
 advances,
 receivables,
 trade payables,
 Accrued expenses.

Exclude
 Cash,
 Investment,
 borrowings,
 interest payable,
 tax payable, and
 bank overdraft.

Cash inflow  increase in liability, decrease in asset

Cash outflow  increase in asset, decrease in liability

ADDITIONAL NOTE 6
Some T accounts should be combined like:
 Share capital and Share premium
 Liabilities classified under current and non-current elements
 Deferred tax and current tax
 INTRODUCTION: GROUP STATEMENT OF CASH FLOWS
This lecture assumes that you are familiar with individual entity’s statement of cash flows.
The group statement of cash flows has further three elements:
1. Cash paid to NCI (i.e. dividends paid to NCI)
2. Cash received from associates (i.e. dividends received etc.)
3. Acquisition and disposal of subsidiaries
8|
CASH (DIVIDEND) PAID TO NCI
The dividends paid to NCI are presented as financing activities’ outflow. We can use T-
account to calculate this figure. The working remains same whichever method is used to
value the NCI.

Non-Controlling Interest
$000
$000
NCI decrease – step acquisition XXX Balance b/d XXX
Cash (dividends paid) β ?? NCI share of profit XX
Balance c/d XXX NCI increase – partial disposal XX
XXX XXX

The following information has been extracted from the consolidated financial statements of
WG for the years ended 31 Dec: QUESTION 07
2007 2006
$000 $000
NCI in consolidated net assets 780 690
NCI in consolidated profit after tax 120 230

What is the dividend paid to non controlling interests in the year 2007?

CASH (DIVIDEND) RECEIVED FROM ASSOCIATE

The dividends received are presented as investing activities’ inflow. Again a T-account
approach is suitable for calculation. Only dividend received represents a cash inflow,
dividends receivable but not yet received represent an increase in group receivables.

Investment in Associates
$000
$000
Balance b/d XXX Impairment loss XX
Share of profit XX Cash (shareholding sold) XX
Share of other reserves XX Cash (dividend received) β ??
Cash (further investment) XX Balance c/d XXX
XXX XXX

The other cash inflow/outflow should also be considered, that includes:

 Cash paid to acquire further shareholding
 Cash received from disposing of some shareholding
 Cash loans made to associate
 Loans paid by associate
 QUESTION 08
The following information has been extracted from the consolidated financial statements of H
for the year ended 31 December 2001:

Group Income Statement

$000
Operating Profit 734 |9
Share of profit from associate 68
Profit before tax 802
Tax on profit (including $20,000 in respect of associate) (324)
Profit after tax 478

Group Statement of Financial Position

2001 2000
$000 $000
Investments in associates
Investments (other than loan) at equity method 466 456
Loan to associates 380 300

Current assets
Receivables 260 190

Included in above receivables are current account with associate 40 70

Show the relevant figures to be included in group statement of cash flows for the year ended
31 December 2001.

ACQUISITION AND DISPOSAL OF SUBSIDIARIES

If a subsidiary is acquired or disposed of during a year, the cash flows of the group should
include the cash flows of that subsidiary for the same period for which results of subsidiary
are included in SCI.

The following must be reported separately:

1. Cash payments to acquire subsidiaries (net of cash and cash equivalent acquired);
and
2. Cash receipts from disposals of subsidiaries (net of cash and cash equivalent
disposed of).

The assets and liabilities purchased (or disposed of) are not shown with the cash outflow (or
inflow) in the statement of cash flows. All assets and liabilities acquired (or disposed of) must
be included in any workings to calculate the cash movement for an item during the year. If
they are not included in deriving the balancing figure, the incorrect cash flow figure will be
calculated. This applies to all assets and liabilities acquired (or disposed of) including the
NCI.

A note to the statement of cash flows should show a summary of the effects of acquisitions
and disposals of subsidiaries, indicating how much of the consideration comprised cash and
cash equivalents and the assets and liabilities acquired or disposed of.
 QUESTION 09
The extracts of a company’s statement of financial position is shown below:
2008 2007
$ $
Inventory 74,666 53,019

10| During the year, a subsidiary was acquired. At the date of acquisition, the subsidiary had an
inventory balance of $9,384.
Calculate the movement on inventory for the statement of cash flows.
FORMAT AND GUIDANCE (CONSOLIDATED)
[Entity Name]
Statement of cash flows For
the year ended [date here]
Cash flows from operating activities: $’000
Profit before tax XXX

Adjustments for:
[non-cash income and expenses included in SPL] XX/(XX)
[items of income and expenses relating to investing or
financing activity but included in SPL] XX/(XX)
[post-employment benefit expense, finance income and
expense] XX/(XX)
Impairment of goodwill (if any) XX
Share of profit from associate (if any) (XX)
Operating profit before working capital changes XXX
[increase or decrease in current assets and liabilities] Note 1 XX/(XX)
Cash generated from operations XXX
Interest paid (XX)
Pension benefits paid (XX)
Income tax paid (XX)
Net cash from (used in) operating activities A XXX

Cash flows from investing activities:

Purchase of non-current assets or short term investment Note 1 (XXX)
(on cash basis)
Disposal of non-current assets or short term investment Note 1 XX
(on cash basis)
Cash received from associate (dividend) XX
Cash paid to acquire subsidiary (net of cash acquired) (XX)
Cash received from disposal of subsidiary (net of cash balance) XX
Investment income (on cash basis) XX
Net cash from (used in) investing activities B (XXX)

Cash flows from financing activities:

Cash proceeds from share issue, loan issue and borrowings Note 1 XXX
Cash paid for share re-purchase, loan and borrowings repayment Note 1 (XX)
Cash (Dividend) paid to NCI (XX)
Interest paid on borrowings/Dividend paid (XX)
Net cash from financing activities C XXX

Net decrease in cash and cash equivalents A+B+C XXX

Cash and cash equivalents at beginning of the year SFP XX
Cash and cash equivalents at end of the year SFP XX
Note1: Remember to take effect of acquisitions, disposals, and exchange gain or loss.
 QUESTION 10
Set out below is a summary of the accounts of Boardres, a public limited company, for the
year ended 31 Dec 2007.
Consolidated income statement for the year ended 31 Dec 2007 $000
Revenue 44,754
Cost of sales and other expenses (39,613)
Income from associates 30 | 11
Finance cost (305)
Profit before tax 4,866
Tax (2,038)
Net profit for the period 2,828
Attributable to:
Owners of the parent 2,805
Non-controlling interests 23
2,828

Statement of other comprehensive income

Profit for the year 2,828
Exchange difference on translation of foreign operations (note 5) 302
Total comprehensive income 3,130

Changes in capital and reserves of equity holders of the parent

Share capital and reserves b/f 14,164
Profit for the year 2,805
Dividends paid (445)
Exchange differences 302
Share capital and reserves c/f 16,826

Consolidated statement of financial position at 31 December

2007 2006
$000 $000 $000 $000
Non-current assets
Goodwill 500 -
Tangible assets (note 1) 11,157 8,985
Investment in associate 300 280
11957 9,265
Current assets
Inventories 9,749 7,624
Receivables 5,354 4,420
Short term investments 1,543 741
Cash at bank and in hand 1,013 17,659 394 13,179
29,616 22,444
Capital and reserves
Called up share capital ($1 ordinary shares) 1,997 1,997
Share premium 5,808 5,808
Reserves 9,021 6,359
16,826 14,164
Non-controlling interest 170 17
Equity 16,996 14,181
Non-current liabilities
Loans 2,102 1,682
Provisions (note 3) 1,290 935
Current liabilities (note 2) 9,228 5,646
29,616 22,444
 Notes to the accounts
(1) Tangible assets
Non-current assets movements included the following:
$000
Disposals at carrying amount 305
Proceeds from asset sales 854
12| Depreciation provided for the year 907

(2) Current liabilities

2007 2006
$000 $000
Bank overdrafts 1,228 91
Trade payables 4,278 2,989
Tax 3,722 2,566
9,228 5,646

(3) Provisions
Provisions Deferred Total
Pension taxation
$000 $000 $000
At 31 Dec 2006 246 689 935
Exchange rate adj 29 - 26
Increase in provision 460 - 460
Decrease in provision - (134) (134)
At 31 Dec 2007 735 555 1,290

(4) Liberated
During the year, the company acquired 82% of the issued share capital of Liberated,
a limited liability company, for cash consideration of $1,268,000. The fair values of
the assets of Liberated were as follows:
$000
Non-current assets 208
Inventories 612
Receivables 500
Cash in hand 232
Trade payables (407)
Debenture loans (312)
833

(5) Exchange gains

Exchange gains on the translating the financial statements of a wholly owned
subsidiary have been taken to equity and comprise differences on the retranslation of
the following:
$000
Non-current assets 138
Pensions (29)
Inventories 116
Trade receivables 286
Trade payables (209)
302

(6) The non-controlling interest is valued using the proportion of net assets method.

Required:
Prepare the statement of cash flows for the year ended 31 Dec 2007.
QUESTION 11 PE 501 Apr 2012
Following are the extracts from the consolidated financial statements of Eastern Group for
the year ended December 31, 2011:
Eastern Group Income
Statement
For the year ended December 31, 2011
Rs. million | 13
Turnover 344.900
Cost of sales (239.900)
Gross profit 105.000
Operating expenses (23.700)
Operating profit 81.300
Finance cost (6.200)
Profit before disposal of property, plant & equipment 75.100
Gain on sale (note 2) 2.200
Profit before tax 77.300
Tax (23.600)
Profit for the period 53.700
Attributable to:
Non-controlling interest 2.320
Owners of the parent 51.380
53.700

Eastern Group
Statement of Financial Position with Comparatives As at
December 31, 2011
2011 Rs. 2010 Rs.
million million
ASSETS
Non-current Assets
Property, plant and equipment 210.100 177.200
Intangible assets 25.640 16.640
235.740 193.840
Current Assets
Inventories 136.000 115.000
Trade receivables 109.520 105.200
Cash 5.480 15.600
251.000 235.800
486.740 429.640
EQUITY AND LIABILITIES
Equity
Share capital 90.000 72.000
Share premium 40.000 40.000
Retained earnings 100.940 73.360
230.940 185.360
Non-controlling interest 14.200 7.680
Non-current Liabilities
Interest bearing borrowings 68.400 77.800
Current Liabilities
Trade payable 143.360 131.240
Interest payable 8.440 5.760
Tax payable 21.400 21.800
173.200 158.800
486.740 429.640
 Notes:
(1) Eastern Company acquired 90% share capital of Northern Company in 2003 and 80%
share capital of Southern Company on July 1, 2011. Eastern Company issued 18 million
of its ordinary shares of Re.1 each and paid Rs.11 million in cash as consideration for
this transaction. When Eastern Company acquired shares in Southern Company the net
assets of the latter had the following fair values:
14|
Rs. million
Property, plant and equipment 18.800
Inventories 8.600
Trade receivables 6.200
Cash 0.200
Trade payables (7.800)
Tax (1.000)
25.000
(2) During the year ended December 31, 2011, Eastern Company disposed of an item of
property, plant and equipment for Rs. 10.500 million that had a carrying value of Rs.
8.300 million at the date of disposal. The depreciation for the current year amounted to
Rs. 31.800 million.
(3) Dividends paid during the year amounted to Rs.23.8 million.

Required:
Prepare Consolidated Statement of Cash Flows of the Eastern Group for the year ended
December 31, 2011 in accordance with IAS-7 Statement of Cash Flows using indirect
method. (25)

QUESTION 12 PE 501 Jun 2011

Following are the draft group financial statements relating to Alamgir and Co listed in KSE:
Alamgir Group
Consolidated Statement of Financial Position As at
December 31
2010 2009
(Rs. 000) (Rs. 000)
ASSETS
Non-Current Assets
Property, plant and equipment 32,700 27,500
Investment property 8,000 6,000
Goodwill 6,000 6,800
Other intangible assets 8,500 7,200
Investment in associate 5,400 -
Available-for-sale financial assets 11,000 9,000
71,600 56,500
Current Assets
Inventory 10,500 12,800
Trade receivables 17,560 11,300
Cash and cash equivalents 2,320 1,430
30,380 25,530
Total Assets 101,980 82,030
LIABILITIES AND EQUITY
Share capital 29,000 27,500
Retained earnings 19,920 14,760
Other components of equity 4,000 2,000
52,920 44,260
Non-controlling interest 5,500 3,600
58,420 47,860
Non-Current Liabilities
Long-term borrowings 13,500 9,300
Deferred tax 3,500 4,100
17,000 13,400
Current Liabilities
Trade payables 23,260 17,770
Current tax payable 3,300 3,000 | 15
26,560 20,770
Total Liabilities and Equity 101,980 82,030

Alamgir Group
Consolidated Statement of Comprehensive Income
For the year ended December 31, 2010
(Rs. 000)
Revenue 43,200
Cost of sales (13,170)
Gross profit 30,030
Revaluation gain on investment property 2,000
Distribution costs (5,200)
Administrative expenses (including dep. of Rs.1 million) (4,500)
Finance costs paid (6,820)
Gains on sale of property 1,050
Goodwill impairment (800)
Amortization of intangible assets (500)
Share of profit of associate 2,000
Profit before tax 17,260
Income tax expense (3,100)
Profit for the year 14,160
Other comprehensive income after tax:
Gain on available for sale financial assets (AFS) 2,000
Total comprehensive income for the year 16,160
Profit attributable to:
Owners of the parent 11,160
Non-controlling interest 3,000
14,160

The following additional information relates to the financial statements of Alamgir Group:
(a) A property having cost of Rs.5 million and WDV of Rs.3 million was sold.
(b) During the year the company made investment in associate of Rs.4 million.

Required:
Prepare a Consolidated Statement of Cash Flows for the Alamgir Group using the indirect
method under IAS-7 .Statement of Cash Flows. 20

QUESTION 13 PE 501 May 2010

The consolidated income statement and consolidated statement of changes in equity of
Perfect Ideal Group for the year ended December 31, 2009 and the consolidated statement
of financial position of the group at the beginning and end of the year 2009, are given below:

(i) Consolidated Income statement - for the year ended December 31, 2009:
Rs. 000
Operating profit 20,000
Interest expense (1,400)
Exceptional Item (note i) 700
Profit before tax 19,300
Net income tax expense (6,500)
 Profit after tax 12,800
Non-controlling interest (1,000)
Group Profit for the year 11,800

(ii) Consolidated Statement of Changes in Equity - for the year ended December
16| 31, 2009:
Balance as of January 1, 2009 49,500
Profit for the period 11,800
Dividends paid (3,000)
Balance as of December 31, 2009 58,300

Consolidated Statement of Financial Position as of December 31

2009 2008
Non-current assets: Rs.000 Rs.000 Rs.000 Rs.000
Property, plant and equipment 51,350 50,000
Current assets:
Inventories 25,000 23,000
Trade receivables 21,000 19,000
Cash and bank 6,000 52,000 2,000 44,000
Total assets 103,350 94,000
Equity and liabilities:
Share capital (Rs.10 each) 20,000 20,000
Retained earnings 38,300 29,500
58,300 49,500
Non-controlling Interest 5,050 5,750
Non-current liabilities:
Long-term loans 9,500 12,500

Current liabilities:
Trade payables 18,500 16,250
Provision for taxation 6,000 5,000
Bank overdraft 6,000 30,500 5,000 26,250
Total equity and liabilities 103,350 94,000

Additional information:
(i) On June 30, 2009 Perfect Ideal Group disposed of its investment in Fine Ltd., a
subsidiary in which it had a shareholding of 80%. The proceeds of the disposal were
Rs.5.5 million. Details of the disposal were as follows:
Net assets at the date of disposal: Rs.000
Property, plant and equipment 4,000
Inventories 2,000
Receivables 2,500
Trade payables (1,500)
Tax (300)
Bank overdraft (200)
Long-term loans (500)
6,000
(ii) Perfect Ideal Group acquired this investment on June 30, 2004 for Rs.1.9 million
when the net assets of Fine Ltd., were Rs.2 million. Goodwill was found to be
impaired several years ago and was fully written off before the start of the current
financial year.

(iii) Depreciation charged during the period in the consolidated income statement
amounted to Rs.10.1 million. There were no disposals of property, plant and
 equipment by the group other than those effectively made upon the disposal of
investment in Fine Ltd.

Required:
Prepare a Consolidated Statement of Cash Flows using the indirect method for Perfect Ideal
Group in accordance with IAS 7 Statement of Cash Flows for the year ended December 31,
2009. 20 | 17

QUESTION 14 CSCF PE Model 2013 Q2

The draft Financial Statement of Maaz Group for the year ended June 30, 2012 are as
follows:

Rs. in
million
Revenue 2,200
Cost of sales (1,540)
Gross profit 660
Operating expenses (225)
Gain on sales of subsidiary 98
Share of Profit from Associate(s) 45
Finance costs (50)
Profit / (Loss) before tax 528
Income tax expenses (151)
Profit / (Loss) after tax 377
Other Comprehensive income
Items that will be reclassified to profit or loss in subsequent accounting
periods
Gain on land revaluation 46
Total Comprehensive income for the year 423
Profit attributable to:
Owners of the parent 343
Non-controlling interest 34
377
Total Comprehensive income Attributable to:
Equity holders of Parent 389
Non-controlling interest 34
423

Rs. in million
2012 2011
Non-Current Assets
Property Plant & Equipment 3,500 2,900
Goodwill 100 150
Investment in Associate(s) 200 225
Current Assets
Inventories 550 450
Debtors 450 575
Cash and Bank 201 150
1,201 1,175
5,001 4,450
Equity
Ordinary share capital @ 10 each 2,000 2,000
Other components of equity 46 -
Retained earnings 1,484 1,200
3,530 3,200
Non-Controlling interest 127 225
 Long-term liabilities
Long term loan 500 400
Obligations under finance lease 150 50
Deferred tax 300 250
950 700
Current Liabilities Trade
18| Payables Income tax 284 250
Obligations under finance lease 35 25
75 50
394 325
5,001 4,450

The following information is available relating to Maaz Group:

(i) Land was re-valued upwards by Rs.46 million on 30 June 2012.

(ii) Depreciation expense for the year is Rs.75 million.

(iii) Additions include assets acquired under finance lease of Rs.150 million.

(iv) On 1st April, 2012 Maaz disposed of a 60% owned subsidiary for Rs.350 million in
cash.
The subsidiary had the following net assets at the date of disposal.
Rs. in million
Property, plant and equipment 400
Inventory 150
Receivables 75
Cash and bank 50
Trade payables (65)
Long-term loans (270)
Income tax (20)
Total 320
The subsidiary was acquired on 1st July, 2010 for a cash payment of Rs.225 million
when its net assets had a fair value of Rs.275 million and the non-controlling interest
had a fair value of Rs.100 million.

(v) It is group policy to account for goodwill on full goodwill method.

Required:
Prepare Consolidated Statement of Cash flows for the year ended June 30, 2012 using
indirect method. (20)
 ANSWERS 13
ANSWER 01
$
Cash in hand 200,000 | 19
Cash at bank 140,000
Short term investments (1 month) in government treasury bills 40,000
Investment in prize bond 80,000
Bank overdraft (20,000)
440,000
ANSWER 02
There will be no particular effect on statement of cash flows because these are movements
within the statement of cash flows.

ANSWER 03
Identify the following transactions as operating, investing, financing or otherwise:
TRANSACTION ANSWER
1. Cash received from customers Operating
2. Cash sales Operating
3. Cash proceeds from disposal of PPE Investing
4. Right issue of shares Financing
5. Repayment of loan Financing
6. Dividend received by stock market broker Operating
7. Dividend paid Financing
8. Salaries paid to employees Operating
9. Interest on debentures paid Financing
10. Interest received by a trading entity on some investment Investing
11. Interest received by a bank on loans advanced Operating
12. Taxes paid Operating
13. Purchase of a patent and software Investing
14. Advance paid to supplier Operating
15. Depreciation Non-cash
16. Bonus issue of shares Non-cash
17. Impairment loss on a plant Non-cash
ANSWER 04
Part (a)
Oxygen Limited
Statement of cash flows For the year ended June 30, 2012
Cash flows from operating activities $
Profit before tax 89,000
Adjustments:
Depreciation 12,000
Finance costs 21,000
Operating capital before working capital changes 122,000
Increase in inventory (230,000 – 185,000) (45,000)
Decrease in prepayments (14,000 – 16,000) 2,000
Increase in trade receivables (52,000 – 30,000) (22,000)
Increase in trade payables (39,000 – 44,000) (5,000)
Cash generated from operations 52,000
Interest paid (21,000)
Income tax paid (b/f 4,000 + PL 30,000 – c/f 5,000) (29,000)
Net cash from operating activities 2,000
 Part (b)
Oxygen Limited Statement
of cash flows
For the year ended June 30, 2012
Cash flows from operating activities $
Cash received from customers
20| (500,000 revenue – 22,000 increase in receivables) 478,000
Cash paid to suppliers and employees (W1) (426,000)
Cash generated from operations 52,000
Interest paid (21,000)
Income tax paid (b/f 4,000 + PL 30,000 – c/f 5,000) (29,000)
Net cash from operating activities 2,000

W1 $
Cost of sales (310,000)
Operating expenses (80,000)
Finance costs (21,000)
(411,000)
Adjustments:
Depreciation 12,000
Finance costs 21,000
Operating capital before working capital changes (378,000)
Increase in inventory (230,000 – 185,000) (45,000)
Decrease in prepayments (14,000 – 16,000) 2,000
Increase in trade payables (39,000 – 44,000) (5,000)
Cash paid to suppliers and employees (426,000)

ANSWER 05
Nitrogen Limited
Statement of cash flows
For the year ended June 30, 2012
Cash flows from investing activities $
Cash paid to acquire PPE (b/f 800,000 – 200,000 dep. – c/f 850,000) (250,000)
Sale proceeds of intangible assets 200,000
Net cash used in investing activities (50,000)

Cash flows from financing activities

Issue of shares (b/f 500,000 + 150,000 – c/f 600,000 + 200,000) 250,000
Long term loan obtained 500,000
Redemption of debentures (100,000 – 400,000) (300,000)
Net cash from financing activities 450,000

ANSWER 06
The repayment of running finance of $ 3,000 (i.e. 47,000 – 44,000) should be presented in
financing activities.

ANSWER 07

Non-Controlling Interest
$000 $000
Cash (dividends paid) β 30 Balance b/d 690
Balance c/d 780 NCI share of profit 120
810 810
 ANSWER 08
Extracts from statement of cash flows
$000
Cash flows from operating activities
Profit before tax 802
Adjustments for:
Share of profit from associates (68) | 21

Cash flows from investing activities

Dividends received from associates (W1) 38
Loan to associate ($380-300) (80)

W1- Investment in Associates

$000
$000
Balance b/d 456 Cash (dividend received) β 38
Share of profit - tax ($68-20) 48 Balance c/d 466
504 504

ANSWER 09
The movement on inventory is [($74,666 – 9,384 Acquisition) – $53,019] = $12,263
This will be shown as outflow.

ANSWER 10
Statement of cash flows for the year ended 31 Dec 2007
Cash flows from Operating activities $000
Profit before tax 4,866
Adjustment:
Depreciation (Note1) 907
Impairment of goodwill (W1) 85
Gain on disposal of assets 854 – 305 (Note 1) (549)
Increase in pension provisions (Note 3) 460
Interest expense 305
Share of profit from associate (30)
Operating profit before working capital changes 6,044
Increase in inventory 9,749 – 7,624 – 612 acq – 116 ex diff (Note 4, 5) (1,397)
Increase in receivables 5,354 – 4,420 – 500 acq – 286 ex diff (Note 4, 5) (148)
Increase in payables 4,278 – 2,989 – 407 acq – 209 ex diff (Note 2, 4, 5) 673
Cash generated from operations 5,172
Interest paid (305)
Tax paid (W2) (1,016)
Net cash from operating activities (A) 3,851

Cash flows from Investing activities

Purchase of non-current assets (W3) (3,038)
Proceeds on disposal (Note 1) 854
Cash paid on acquisition of subsidiary, net of cash acquired $1,268 – 232 (Note 4) (1,036)
Dividend received from associate (W4) 10
Net cash using in investing activities (B) (3,210)

Cash flows from Financing activities

Dividends paid (445)
Dividends paid to NCI (W6) (20)
Proceeds from debt issue (W5) 108
Net cash used in financing activities (C) (357)
 Net increase in cash and cash equivalents (A+B+C) 284
Opening cash and cash equivalents (394 – 741 – 91) 1,044
Cash and cash equivalents (1,013 + 1,543 – 1,228) 1,328

Workings $000
W1: Goodwill $000
22| Cost of investment (Note 4) 1,268
Less: net assets acquired 82% x 833 (Note 4) (683)
Goodwill arising 585
Amount written off (β) 85
Remaining in SFP 500

W2 Tax
Cash 1,016 Bal b/f – CT 2,566
Bal c/f – CT 3,722 Bal b/f – DT 689
Bal c/f - DT 555 I/S 2,038
5,293 5,293

W3 Non current assets

Bal b/f 8,985 Dep 907
Exchange gain 138 Disposal 305
Acquisition 208 Bal c/f 11,157
Cash 3,038
12,369 12,369

W4 Dividends from associates

Bal b/f 280 Cash 10
Profit 30 Bal c/f 300
310 310

W5 Debentures
Bal c/f 2,102 Bal b/f 1,682
Acquisition 312
Cash 108
2,102 2,102

W6 Non-controlling interest
Cash 20 Bal b/f 17
I/S 23
Bal c/f 170 Acq (18% x 833) 150
190 190

ANSWER 11 PE 501 Apr 2012

Eastern Company Consolidated
statement of cash flows For the year ended
December 31, 2011
Rs. in m Rs. in Marks
m
Cash flows from operating activities
Profit before tax 77.300 0.5
Add: Depreciation 31.800 0.5
Finance cost 6.200 0.5
Less: Gain on sale of non – current assets (8.300 – (2.200) 1.0
10.500)
113.100
 (Increase) in inventories (136.000- 8.600 – 10.500) (12.400) 1.5
Decrease in trade receivables (109.520-6.200-105.200) 1.880 1.5
Increase in trade payables 4.320 1.5
Cash generated from operations 106.900
Interest paid (3.520)
Income taxes paid (25.000)
Net cash from operating activities 78.380 | 23

Cash flows from investing activities

Acquisition of subsidiary net (0.200 – 11.00) (10.800) 0.5
Purchase of PPE (54.200) 0.5
Sale of PPE 10.500 1.0
Net cash (used in) investing activities (54.500)

Cash flows from financing activities

Repayment of interest- bearing borrowings (77.8- (9.400) 1.0
68.4)
Dividends paid (23.800) 0.5
Dividends paid to NCI (0.800) 0.5
Net cash (used in) financing activities (34.000) 1.0
Net (decrease) in cash and cash equivalents (10.120) 0.5
Cash and cash equivalents at the beginning 15.600 0.5
Cash and cash equivalents at the end 5.480 0.5

Workings:
Non controlling interest in Southern Co: 100% - 80% = 20%
Interest payable Marks
1+0 Interest paid (bal.) 3.520 Balance b/d 5.760
Balance c/d 8.440 Income statement 6.200 0+0.5
11.960 11.960

Tax payable
Income tax paid (bal.) 25.000 Balance b/d 21.800
Balance c/d 21.400 Subsidiary 1.000 1.0+0
Income statement 23.600 0+0.5
0+0.5
46.600 46.400

PPE
Balance b/d 177.200 Disposal 8.300
Subsidiary 18.800 Depreciation for the year 31.800 0+0.5
Addition 54.200 Balance c/d 210.100 0.5+0.5
250.200 250.200 1.0+0

Non – controlling interests

Cash/ dividend paid 0.800 Balance b/d 7.680
Balance c/d 14.200 Income statement 2.320 1+0.5
Subsidiary (20% of 25.000) 5.000 0+1.0
15.000 15.000

ANSWER 12 PE 501 Jun 2011

Alamgir Group
Consolidated statement of cash flows For the year ended December 31, 2010

Rs. in Rs. in Marks

Cash flows from operating activities 000 000
Profit before tax 17,260 0.25
 Depreciation 1,000 0.25
Amortization of intangible assets 500 0.25
Gain on sale of PPE (1,050) 0.25
Profit on investment property (8,000-6,000) (2,000) 1.0
Associate’s profit (2,000) 0.25
Impairment of goodwill (6,800-6,000) 800 1.0
24| Finance cost 6,820 0.25
(Increase) in trade receivables (17,560 – 11,300) (6,260) 1.0
Decrease in inventories (12,800 – 10,500) 2,300 1.0
Increase in trade payables (23,260 – 17,770) 5,490 1.0
Cash generated from operations 22,860
Interest paid (6,820) 0.25
Income taxes paid (3,400) 0.25
Net cash from operating activities 12,640 0.25

Cash flows from investing activities

Investment in associates (4,000) 0.25
Purchase of PPE (9,200) 0.25
Sale of PPE (3,000+1,050) 4,050 1.0
Purchase of intangible assets (1,800) 0.25
Dividends received from associates 600 0.25
Net cash (used in) investing activities (10,350) 0.25

Cash flows from financing activities

Issuance of long term borrowings (13,500 – 9,300) 4,200 1.0
Issuance of shares (29,000-27,500) 1,500 1.0
NCI dividends 1,100 0.25
Dividends paid 6,000 0.25
Net cash flow from financing activities 1,400 0.25
Net increase in cash and cash equivalents 890 0.25
Cash and cash equivalents at the beginning 1,430
Cash and cash equivalents at the end 2,320

Rs. in 000 Marks

Working 1 : Additions to PPE
Closing balance 32,700
Sale WDV 3,000 0.5
Current depreciation 1,000 0.5
Opening balance (27,500)
Additions during the year 9,200 0.5

Working 2 : Sale of PPE

WDV of PPE 3,000
Gain on sale of PPE 1,050
Cash flow from sale of PPE 4,050 1.0

Working 3 : Income taxes

Opening balance current tax 3,000
Opening balance deferred tax 4,100
Taxation for the year 3,100 0.5
Closing balance current tax (3,300)
Closing balance deferred tax (3,500)
Taxes paid 3,400 0.5
Working 4: Investment in associates
Investment in associate (BF) 4,000
Profit share from investment 2,000 0.5
Closing balance (5,400)
Dividends received (600) 0.5

Working 5: Intangible assets | 25

Closing balance 8,500
Amortization 500 0.5
Opening balance (7,200)
Purchase of intangible assets 1,800 0.5

Working 6: NCI
Opening balance 3,600
Share of profit 3,000 0.5
Closing balance (5,500)
Dividends paid 1,100 0.5

Working 7 : Dividend paid

Retained earnings b/d 14,760
Profit for the year 11,160 0.5
Retained earnings closing balance (19,920)
Dividend paid 6,000 0.5

ANSWER 13 PE 501 May 2010

Perfect Ideal Group
Cash Flow Statement
For the year ended December 31, 2009

Rs. in Rs. in Marks

Cash flows from operating activities 000 000
Operating profit 20,000 0.5
Depreciation 10,100 0.5
Changes in working capital
(Increase in inventory (w1) (4,000) 0.5
(Increase) in receivables (w1) (4,500) 0.5
Increase in payables (w1) 3,750 (4,750) 0.5
25,350
Interest paid (1,400) 0.5
Tax paid (w2) (5,200) 0.5
Net cash from operating activities 18,750

Cash flows from investing activities

Purchase of PPE (w3) (15,450) 0.5
Sale of Fine Ltd. (w6) 5,700 0.5
Net cash (used in) investing activities (9,750)

Cash flows from financing activities

Payment of long term loan (w7) (2,500) 0.5
Dividends paid – Parent company (3,000) 0.5
- NCI (w4) (500) 0.5
Net cash flow from financing activities (6,000)
Net increase in cash and cash equivalents 3,000
Cash and cash equivalents at the beginning (w5) (3,000) 0.5
Cash and cash equivalents at the end (w5) 0 0.5
 W1 – Working capital changes
Net movement as Net
Movement due
per SFP movement Marks
to disposal
per CFS
Inventories (2,000) (2,000) (4,000) 1.0
Receivables (2,000) (2,500) (4,500) 1.0
26| Payable 2,250 1,500 3,750 1.0

W2 – Tax liability
Rs. 000 Marks
Tax liability – opening balance 5,000
Charge for the year 6,500
Tax reduction due to disposal (300)
Cash paid (balancing) (5,200) 1.0
Tax liability closing balance 6,000

W3 – Capital expenditure
Rs. 000 Marks
PPE at the beginning of year 50,000
Reduction due to disposal of Fine Ltd. (4,000)
Depreciation for the year (10,100)
Additions for the year 15,450 2.0
PPE at the end of year 51,350

W4 – Dividends to NCI
Rs. 000 Marks
NCI at beginning of the year 5,750
Reduction due to disposal (1,200) 1.0
NCI in the results for the year 1,000 0.5
Dividends paid (balancing) (500) 1.0
NCI at the end of the year 5,050

W5 – Cash and cash equivalent

Rs. 000 Marks
At beginning of the year (cash 2,000 – OD 5,000) (3,000) 0.5
At end of the year (cash 6,000 – OD 6,000) 0 0.5

W6 – Net proceeds from sale of Fin eLtd.

Rs. 000 Marks
Cash received from purchaser 5,500
Bank OD of Fine Ltd. 200
5,700 1.0
W7 – Repayment of long term loan
Rs. 000 Marks
Opening balance 12,500
Less: reduction due to disposal of subsidiary (500) 0.5
Payment (bal. fig) (2,500) 1.0
Closing balance 9,500
ANSWER 14 CSCF PE Model 2013 Q2
Maaz Group
Cash Flow Statement For the year ended June 30, 2012
Rs. in m
Cash flows from operating activities
Profit before tax 528
Adjustments: | 27
Depreciation 75
Gain on sale of subsidiary(w12) (98)
Fianance cost 50
Share of profit from associate (45)
Operating profit before changes in working capital 510
Decrease in receivables (w3) 50
Increase in inventories (w2) (250)
Increase in trade payables (w4) 99
Cash generated form operations 409
Interest paid (50)
Tax paid (w5) (71)
Net cash from operating activities 288

Cash flows from investing activities

Dividend from associate (w6) 70
Proceeds from sale of subsidiary 350 – 50 300
Purchase of PPE (w1) (879)
Net cash (used in) investing activities (509)

Cash flows from financing activities

Payment of finance lease w7 (25)
Dividend paid to shareholders w9 (59)
Dividend paid to NCI w10 (14)
Long term loan w8 370
Net cash flow from financing activities 272

Net increase in cash and cash equivalents 51

Cash and cash equivalents at the beginning 150
Cash and cash equivalents at the end 201

W1 - PPE
Opening balance 2,900 Disposal 400
Lease assets 150 Depreciation 75
Addition 879
Revaluation 46 Ending balance 3,500
3,975 3,975

W2 - Inventory
Opening balance 450 Disposal 150
Balancing/figure(cash) 250 Ending balance 550
700 700

W3 – Accounts receivable
Opening balance 575 Disposal 75
Receipt from customers 50
Ending balance 450
575 575
 W4 – Trade Payables
Disposal 65 Opening balance 250
Ending balance 284 Balancing/figure 99
349 349

W5 - Taxation
28| Disposal 20 Opening balance (250+25) 275
Balancing/figure 71 Provision 151
Ending balance (300+35) 335
426 426
W6 - Investment in Associate
Opening balance 225 Balancing/figure (cash) 70
Profit for the year 45 Ending balance 200
270 270
W7 - Finance Lease Obligation
Balancing/figure 25 Opening balance (50+50) 100
Ending balance (150+75) 225 Addition 150
250 250

W8 - Long-term borrowings
Disposal 270 Opening balance 400
Ending balance 500 Addition (Cash) 370
770 770

W9 – Retained Earnings
Dividend paid 59 Opening balance 1,200
Ending balance 1,484 Profit for the year 343
1,543 1,543

W10 - Non-Controlling interest

Dividend paid 14 Opening balance 225
Disposal (w-11) 118 Profit for the year 34
Ending balance 127
259 259

W-11 NCI in sub at disposal date

FV on NCI at acquisition 100
NCI share of increase in post acquisition profit (320-275)x40% 18
118

W-12 Rs. m
Gain on sale of sub:
Sale proceeds 350
Less: Share in NA at disposal (320 x 0.60) (192)
Goodwill (60)
98
Parent share in goodwill:
Faire value of considered paid 225
Net assets acquired (275 x 0.6) (165)
60
Faire value of NCI 100
Net assets acquired (275 x 0.4) 110
(10)
Total goodwill (60 - 10) 50