Statement of Cash

Flows (SCF)
Learning Objectives:
• discuss the components and structures of a
Statement of Cash Flows
• prepare a Statement of Cash Flows
Statement of Cash
Flows
Provides an analysis of inflows and/or
outflows of cash from/to operating,
investing and financing activities (Deloitte
Global Services Limited, 2015). This
statement shows cash transactions only
compared to the SCI which follows the
accrual principle.
Three major sections:
1. Operating Activities
Three major sections:
2. Investing Activities
 The activities generally result from
acquisition and disposal of non-current.
 Examples of investing activities
Cash payments to acquire property, plant and -
equipment
Cash payments to acquire intangible assets -

Cash receipts from sale of property, plant, and +

equipment
Cash receipts from sale of intangible assets +
Cash receipts from sale of long-term assets +
Three major sections:
3. Financing Activities
 The activities usually arise from changes
in non-current liabilities and owner’s
equity of a business organization.
 Examples of Financing activities
Cash investments from owners +

Cash proceeds from bank loans +

Cash distributions to owners -

Repayment of bank loans -
Decision Rule in Dtermining
Classification of Cash Transactions
 Operating – Profit or loss
 Investing – Non-current Asset
 Financing – Equity and Non current
liability
Approaches of the Statement of Cash
Flows
1. Direct Method
The direct method presents each major
classification of gross receipts and gross
payments for operating activities. This is in
line with the items presented in the table
below. IAS (IASB, 2001) encourages the use
of the direct method.
1. Direct Method
Approaches of the Statement of Cash
Flows
1. Indirect Method
The indirect method however, presents the
operating activities starting with the pre-
tax income. It then reconciles the pre-tax
for non-cash income and expenditures.
After which, the movement in current
assets and liabilities are adjusted to the
2. Indirect Method