Welcome to

Public Service Financial Reporting – Session

9
IPSAS 2 Cash flow statements Part 2

We will start in a few minutes

The Chartered Institute of

Public Finance & Accountancy
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By the end of the session you will be able to…
 Discuss and apply the requirements of
 IPSAS 2 Cash flow statements

WB Ref: 8 3
IPSAS 2 Cash Flow Statements
Workbook 8

The Chartered Institute of

Public Finance & Accountancy
IPSAS 2 – Direct method
 Interest paid and interest and
dividends received are usually
classified as operating cash flows for a
public financial institution
Disclosed separately
WB Ref:
 Dividends paid may be classified as a
financing cash flow because they are
a cost of obtaining financial resources.
Alternatively, dividends paid may be
classified as a component of cash
flows from operating activities
WB8 5
IPSAS 2 – Direct method
Disclosed separately
Receipts
Taxation X X
Sales of goods and services X X
Grants X X
Interest received X X
Other receipts X X

Payments
Employee costs (X) (X)
Superannuation (X) (X)
Suppliers (X) (X)
Interest paid (X) (X)
Other payments (X) (X)

WB Ref: WB8 6
Cash flows investing activities

Cash flows arising from investing activities are important as

they provide information on the level of investment that an
entity has made in assets that it will hold and use in its
business on an ongoing basis

Only expenditures that result in a recognised asset in the

statement of financial position are eligible for classification as
investing activities

WB Ref: 8.5 7
Cash flows from investing activities - examples

Cash paid to acquire/receipt

Cash paid to acquire/receipt
from the sale of PPE
Cash paid to acquire/receipt
from the sale of an
from the sale of a separate
intangible asset such as a
entity
brand or trademark

Cash paid to acquire/

receipt from the sale of an Cash given as an advance
equity or debt instrument in or loan to another entity, or
another entity, such as a repayment of such items
joint venture

WB Ref: 8.5 8
Cashflows from investing activities -proforma

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of plant and equipment (X) (X)

Proceeds from sale of plant equipment X X
Proceeds from sale of investments X X
Purchase of foreign currency securities (X) (X)
Net cash flows from investing activities (X) (X)

WB Ref: 8.5 9
Tutor led example

Example 2

WB Ref: 8.5 10
Now you try…

Exercise 8.5

WB Ref: 8.5 11
Financing activities

Financing activities change the amount and composition of

an entity's contributed capital and borrowings

Such activities are included under a separate heading in the

cash flow statement

This analysis provides useful information on the amount of

cash generated by the entity that will be needed to service its
financing activities

WB Ref: 8.6 12
Financing activities - examples
Cash proceeds received
from issuing debt
instruments, such as
debentures, bonds or long-
term borrowings
The principal (capital)
element in finance lease
payments made during the
period
WB Ref: 8.6
Cash paid to repay debt
instruments
Cash proceeds received
from additional capital from
other government entities
and cash paid to repay
capital to other government
entities
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Financing activities - proforma

Capital contributed by other government entities X X

Proceeds from borrowings X X
Repayments of borrowings (X) (X)
Distribution/dividend to government (X) (X)
Cash flows from financing activities (X) (X)

WB Ref: 8.6 14
Tutor led example

Example 3

WB Ref: 8.6 15
Now you try…

Exercise 8.6

WB Ref: 8.6 16
Other issues

Net or gross?

Taxation

Interest and dividends

Unwinding the discount on provisions

Foreign currency

Non-cash transactions

Additional disclosures

WB Ref: 8.7 17
Unwinding the discount on provisions

The direct method

Finance costs arising from the unwinding of discounts on provisions (IPSAS 19) are
not a cash flow and are not included within the interest paid cash flow

The indirect method

All movement in provisions, regardless of whether due to unwinding or actual
changes, are treated as a movement in working capital as with the movements in
receivables, inventories and payables

WB Ref: 8.7.4 18
Preparing the cash flow statement

1. Read the requirement (note whether direct or indirect method is required)

2. Insert the title of the cash flow statement (for year ended XX/XX/XX)

3. Put in cash and cash equivalents brought forward, carried forward and net
increase/decrease in year - include any bank overdrafts and short term investments

4.Quickly read through information given

5.Start from the top of your cash flow statement and calculate each figure required

6.Use all the information given in the question

WB Ref: 8.8 19
Calculating surplus/deficit for the year

WB Ref: 8.8.1 20
Tutor led example

Exercise 8.7

WB Ref: 8.8 21
Areas we covered

IPSAS 2 Cash flow from

investing activities

IPSAS 2 Cash flow from

financing activities

Cash flow statements

WB Ref: 22
Upcoming session…

 Cash Basis IPSAS

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Contact me

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