Cash Flow Statement Work 1
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ScribdTranslationsCash Flow Statement Work 1
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ScribdTranslationsThe statement of cash flows is included in the basic financial statements that
Companies must prepare to comply with regulations and rules.
institutional bodies of each country. This provides important information for the
business administrators and arises as a response to the need to determine
the output of resources at a specific moment, as well as an analysis
projective to support decision making in financial activities,
operational, administrative, and commercial.
Below is a practical example of the theory presented in the article
from the cash flow statement. The company has the following information
expressed in the financial statements.
ABC COMPANY BALANCE SHEET 31-12-X1
ASSETS
Current
Cash $1,800
Accounts Receivable $10,200
Inventory 17,000
Investments in stocks $ 6,000
Total Current Assets $ 35,000
No current
Property, plant, and equipment
Land $100,000
Building $98,000
Furniture $56,000
Vehicles $ 85.000
Accumulated depreciation $ -60.000
Total $ 279.000
Appraisals $286,000
Total assets $600,000
LIABILITIES
Current
Accounts payable $15,000
Labor obligations $5,000
Taxes $ 1.500
Bank obligations $8,500
Total current liabilities $30,000
Long-term liabilities
Labor obligations $ 28,000
Long-term obligations $150,000
Total long-term liabilities $178,000
Total liabilities $208,000
HERITAGE
Subscribed capital $40,000
Reservations $21,000
Revaluation of assets $30,000
Utilities of the period $ 15,000
Surplus $286,000
Total assets $392,000
Total liabilities + equity $600,000
Additional information:
They obtained $50,000 from long-term obligations and $60,000 from the issuance of
actions.
Profits were allocated as follows: 60% for dividends and 40% for reserves.
A vehicle was purchased for $60,000 and furniture for $40,000, payment was made for the
the same $$30,000 in cash and the rest was financed in the long term.
Additional cash investments of $12,000 were purchased.
Cash investments were sold for $4,000 (adjusted cost $2,800)
ABC COMPANY
STATEMENT OF RESULTS
JANUARY/DECEMBER 19X2
Sales $360,000
Inflation adjustment $40,000
Adjusted sales $400,000
Cost of merchandise $ 170.000
Adjustment for inflation $ 25.000 $ 195.000
Gross profit $ 205.000
General expenses
Labor $70,000
Sales and management $ 40,000
Depreciation $22,500
Inflation adjustment $ 15.500 $ 148.000
Operational usefulness $57,000
Other income/expenses
Utility sale investments $ 1,200
Investment returns $ 1,800
Adjustment for inflation $300
Financial expenses -$25,000
Adjustment for inflation $ -4.000 $ -25.700
Utility before correction m $31,300
Monetary correction $47,000
Profit before tax $78,300
Tax provision $ -23.300
Utility of the period $55,000
COMPANY ABC
INCOME STATEMENT
JANUARY/DECEMBER 19X2
Sales 360000
Adjustment for inflation 40000
Adjusted sales 400000
Cost of merchandise 170000
Adjustment for inflation 25000 195000
Gross profit 205000
General expenses
Labor 70000
Sales and administration 40000
Depreciation 22500
Adjustment for inflation 15500 148000
Operating utility 57000
Other income/expenses
Profit from investment sales 1200
Investment Returns 1800
Adjustment for inflation 300
Financial expenses -25000
Adjustment for inflation -4000 -25700
Utility before correction m 31300
Monetary correction 47000
Profit before tax 78300
Tax provision -23300
Utility of the period 55000
ABC COMPANY
BALANCE SHEET
31-12-X2
ASSETS
Current
Cash $38,700
Accounts Receivable $ 12,000
Inventory $20,000
Investments in stocks $ 16.800
Total Current Assets $87.500
No current
Property, plant and equipment
Land $120,000
Building 117,000
Furniture $106,000
Vehicles $161,000
Accumulated depreciation -94.500
Total $ 409,500
Valuations $320,000
Total assets $817,000
LIABILITIES
Current
Accounts payable $20,000
Labor obligations $ 8,000
Taxes $18,000
Bank obligations $2,000
Total current liabilities $48,000
Long-term liabilities
Labor obligations $30,000
Long-term obligations $190,000
Total long-term liabilities $ 220.000
Total liabilities $ 268.000
HERITAGE
Subscribed capital $100,000
Reservations $ 27.000
Revaluation of assets $47,000
Period utilities $55,000
Surplus $320,000
Total assets $ 549.000
Total liabilities + equity $817,000
The aim of this statement is to present relevant and concise information regarding
The cash receipts and disbursements of an economic entity during a period.
Calculations:
Cash: This item includes cash in hand and banks and all the
fixed amount investments with a term not exceeding three months.
31/12/X1 31/12/X2
Cash and banks 5000 1500
Short investments
33700 300
deadline
Cash 38700 1800
Monetary correction: Of the total inflation adjustment in inventories for the period
$30,200, the inventory balance on 12/31/X2 contains $5,200 and the difference for
$25,000 was taken as the cost of goods sold.
Property, plant, and equipment: During the period, the following were acquired
Vehicle $60,000
Furniture $40,000
A cash payment of $30,000 was made and the rest was financed with an obligation for 36 months.
Monetary correction on 31/12/X2: The following occurred during the period
movement.
Adjustment P P and equipment $65,000
Inventory adjustment $5,200
Adjust investments $1,600
Adjust equity -17.000
Adjustment accumulated depreciation -12,000
Adjust balance accounts $ 42.800
Adjust accounts result $4,200
Usefulness by exposure to the
$47,000
inflation
With the previous data, the fundamentals are applied and carried out by both.
methods exposed in the theoretical article.
ABC COMPANY
CASH FLOW STATEMENT
JANUARY/DECEMBER 19X2
DIRECT METHOD
Operating activities
Client collection $ 358.200
Payments to employees -65,000
Payments to suppliers $ -162.800
Payments, other expenses, sales, and administration $ -40.000
Cash generated from operations $90,400
Financial expenses payments -$25,000
Pay taxes -6.800
Investment performance $1,800
Net cash flow from operations $60,400
Investment activities
Buy PPy equipment -30.000
Investment purchase -12.000
Sale of investments $ 4,000
Net cash flow in investment -38.000
Financing activities
Issuance of shares $60,000
New long-term liabilities $50,000
Payment of long-term obligations -80,000
Payment of bank obligations $ -6.500
Payment of dividends -9.000
Net cash flow in financing $14,500
Cash increase $36,900
Cash 12/31/X1 $1,800
Cash 31/12/X2 38.700
COMPANY ABC
CASH FLOW STATEMENT
JANUARY/DECEMBER 19X2
INDIRECT METHOD
Operational activities
Utility of the period $ 55,000
Entries that do not affect cash
Depreciation $ 22,500
Inflation adjustments -42.000
Profit from investment sales $ -1.200 $ -21.500
Cash generated from operations $ 33.500
Change in operational accounts
Increase in accounts receivable -1.800
Decrease in inventories 2,200
(+) Increase in accounts payable 5,000
(+) Increase in labor obligations $ 5,000
Increase in taxes $16,500
Net cash flow from activities $60,400
Investment activities
Purchase PP and equipment $ -30,000
Purchase of investments -$12,000
Investment sales $4,000
Net cash flow in investment $ -38,000
Financing activities
Issuance of shares $60,000
New long-term obligations $50,000
Long-term obligations payment -80,000
Payment of bank obligations -6.500
Dividend payment -9.000
Net effective cash flow in financing $ 14.500
Effective increase $36,900
Cash 31/12/X1 $1,800
Cash 31/12/X2 $38,700
The analysis is focused on the information produced by any of the
methods are the same and it is what determines the decisions that I make
financial administrator.
Another concept
The cash flow is one of the most complex financial statements to prepare and that
they require a deep understanding of theaccountingfrom the company to be able to develop it.
According to the Technical Council of Accounting, cash flow is understood to be
basic financial statement that shows the cash generated and used in activities
operation, investment and financing. For this purpose, the change in the must be determined.
different items in the balance sheet that affect cash.
The aim of the cash flow is basically to determine thecapacity of the company to
generate cashwith which they can fulfill their obligations and their projects of
investment and expansion. Additionally, cash flow allows for a study or
analysis of each of the items affecting cash generation, data that
they can be very useful for the design of policies and strategies aimed at
to make a more efficient use of the company's resources.
It is important for the company to have clarity about its ability to generate cash,
how it generates that cash, in order to project itself and make appropriate decisions with
its true liquidity capacity.
As a general rule, the values recorded in group 11 are considered effective.plan
of commercial accountsthis is cash, banks, remittances in transit, savings accounts and funds,
so the balances of these accounts must match the result shown by the statement
of cash flows.
Structure of the cash flow statement
From the definition that the Technical Council of Accounting provides, we note three very important elements.
important components that make up a cash flow statement: Operating activities, Investing
and Financing. Let's take a broad look at what each of these means and includes.
activities.
Operating activities. Operating activities refer basically to
the activities related to the development of the company's social purpose, that is to
production or marketing of their goods, or the provision of services.
Among the elements to consider are the sale and purchase of goods. The payments for
public servicespayroll, taxes, etc. In this group we find the accounts of
inventories, accounts receivable and payable, liabilities related to payroll and the
taxes.
Investment activities. Investment activities refer to investments.
from the company in fixed assets, in the purchase of investments in other companies, securities,
etc.
Here are included all purchases that the company makes different from inventories and
expenses, aimed at the maintenance or increase of the productive capacity of the company.
The accounts corresponding to property, plant, and equipment are part of this group.
intangibles and investments.
Financing activities. Financing activities refer to the
acquisition of resources for the company, which can well be from third parties [liabilities] or from its own
partners [assets].
In financing activities, liabilities corresponding to the must be excluded.
operational activities, that is, suppliers, labor liabilities, taxes, etc.
Essentially corresponds to financial obligations and bond placement.
It is a financing activity.capitalizationof the company whether through new
contributions from partners or through the incorporation of new partners through the sale of
actions.
Necessary elements to develop cash flow
To develop the cash flow it is necessary to take into account thebalance sheetof the last two
years and the lastincome statementWe need the balances to determine the
variations in the balance sheet accounts [Comparative balance].
It is also essential to have not thenotes to the financial statementswhere certain are recorded
operations that have involved the inflow or outflow of cash, or items that do not have
any effect on cash.
Development of the cash flow statement
The cash flow statement can be prepared using two methods:The direct methodand the
Indirect method.
Direct method
One of the ways to create the cash flow is through the direct method, which...
basically consists of redoing the income statement using the cash system,
mainly to determine the cash flow from operating activities.
Before trying to understand this method, it is important that you consult theaspects
general state of cash flowYou can also check thecash flow for the
indirect method.
In the suggested consultation document, we observe that the cash flow statement is
consists of three elements: Operating Activities, Investment, and Financing, and that
we also need the balance sheet for the last two years and the latest statement of
results.
For simplicity, we will create a cash flow statement in its simplest form.
elementary, to ensure that the procedure to follow is understood as much as possible.
CASH FLOW FROM FINANCING ACTIVITIES:
Customer collection: 100,000
(-) Labor payments: 20,000
(-) Payment to suppliers: 30,000
(-) Payment expenses: 10.0000
(-) Cost payment: 15,000
(-) Tax payment: 5,000
(-) Payment of financial expenses: 5,000
Cash generated from operating activities = 15,000
We obtained each of the previous values from the variations of the respective account.
using the financial statements [Balance sheet and income statement]
Example of how to determine customer collections:
Ventas (4135): 120.000
Year 1 final balance clients (1305): 50,000
Final balance year 2 clients (1305): 70,000
Then,
50,000
(+) 120,000
- 70,000
Customer collection = 100,000
To determine customer collections, we take the net sales listed in thestate
of resultswe add them to the portfolio balance of year 1, and we subtract the portfolio balance in
the year 2.
The same procedure is carried out with each of the concepts as payment to
suppliers, taxespayrolletc. That is why the general balance of the
in the last two years, in order to determine the balance of each account in each of the years and
thus be able to determine the variations and consequently what has been effectively paid.
Due to space and simplicity, we did not include the calculation of each concept.
and we consider that it is sufficient for it to be understood how to determine a concept for
to be able to determine the others.
CASH FLOW FROM INVESTING ACTIVITIES
Sale of investments: 70,000
Used vehicle sale: 20,000
Purchase of machinery: 80,000
Furniture purchase: 10,000
Then,
70,000
(+) 20,000
-80,000
-10,000
Cash generated from investment activities = 0
To know how much cash has been raised or spent on investment, we use the
notes to the financial statements, or of the variation of the respective accounts of
active, product of the comparison of the balances of the last two years.
Let us remember that investment activities refer to fixed assets of the
company and investments in stocks or bonds.
CASH FLOW GENERATED IN FINANCING ACTIVITIES
Capitalization through stock issuance: 50,000
Sale of bonds: 30,000
Payment of financial obligations: 60,000
Payment of shares: 25,000
Then,
50,000
(+) 30.000
- 60,000
-25,000
Cash generated from financing activities = -5,000
Now we proceed to consolidate:
Efectivo generado en actividades de operación: 15.000
Cash generated from investing activities: -0-
Cash generated from financing activities: -5,000
TOTAL CASH FLOW GENERATED BY THE COMPANY = 10,000
The cash determined in the cash flow statement must match the balance of
these accounts. If not, it means that the cash flow statement was not prepared.
correctly.
The difference between the direct method and the indirect method lies solely in the
procedure applied to operational activities, since the procedure
applied to investment and financing activities is exactly the same in both
methods.
Note: It is essential to have thebalance sheetof the last two years and with the
income statement for the last year. Here, due to space limitations, some have been omitted and
he has worked with assumed values, but the procedure is the same.
Indirect method
One way to prepare the cash flow is by using the indirect method, which consists of
from the utility generated by theincome statementto then proceed to debug it
until reaching the cash balance that is in theaccounting books.
Before continuing, it is important that you consult thegeneral aspects of the flow statement
cashto better understand what this method consists of. It can
also consult thecash flow by the direct method.
With the reading of the suggested document, it becomes clear to us that the cash flow of
cash is composed of three parts which are: Operating activities; Financing activities
investment and financing activities. For each of those activities we must
determine a cash flow to then consolidate the individual results.
To make things as simple and straightforward as possible, we will work with the information.
minimum necessary, taking into account that in order to carry out the cash flow,
we need of thebalance sheetfrom the last two years and thestatement of resultsof the last
year.
CASH FLOW FROM OPERATING ACTIVITIES
To determine the cash flow in financing activities, we start from the
utility presented by the income statement, we add the items that have not
meaning outflow of money and we subtract the items that did not imply inflow of
cash.
We subtract the increase in accounts receivable from the previous result, and we add the
decrease in inventories, increases in accounts payable, and increases in
the other liabilities corresponding to operating activities such as
taxes, labor obligations, etc.
The scheme would be as follows:
Utility of the exercise: 100,000
Items that do not affect cash.
(+) Depreciaciones: 20.000
(+) Amortizations: 10,000
(-) Ingresos por recuperaciones: 5.000
Variation in items related to operating activities
(+) Increase in labor obligations: 2,000
(+) Increase in taxes payable: 1,000
(+) Increase in accounts payable: 3,000
(+) Decrease in inventories: 5,000
(-) Increase in accounts receivable: 50,000
Cash generated by operating activities = 86,000
Clarifications.depreciationsyamortizationsare added to the profit since the
utility is diminished by the value of depreciations and amortizations, and as the
Depreciations do not imply cash outflows, for the purpose of reaching net cash.
generated, they must be added, this is because the goal is to reach the cash balance
starting from theutility.
In the case of recoveries, these are accounted for as income, but in no way
money has been received in cash, so they must be excluded.
The increases in accounts receivable and other items are determined by the
variations presented from one year to another.
The increase in accounts receivable is deducted from the profit since there was no income.
from money for the sale of goods. Part of the sales were made on credit.
The decrease in inventories is attributed to a sale that has occurred.
merchandise, which implies cash inflow.
The increase in accounts payable is added because part of the purchased goods is
they were made on credit, so there was no cash outflow. The same happens with the obligations
labor costs and the taxes to be paid.
In conclusion, utility is supplemented by any concept that does not involve the exit of
money and subtract all those concepts that do not imply money coming in. If I sell to
Credit does not involve money coming in. If I buy on credit, no money goes out.
CASH FLOW FROM INVESTING ACTIVITIES
The procedure applied to determine the cash flow in the activities of
investment, is the same as that used in the direct method.
Let's see:
Sale of investments: 150,000
Sale of used vehicle: 30,000
Purchase of machinery: 70,000
Furniture purchase: 20,000
Then,
150,000
(+) 30,000
-70,000
-20,000
Cash generated from investment activities = 90
The values of investments and sales are taken from accounting, either to compare the
balance sheet of the last two years or of thenotes to the financial statements.
At times it is not enough to compare one year with another, but it is required
additional information, so it is necessary to fully understand the operations that the
the company has carried out.
CASH FLOW FROM FINANCING ACTIVITIES
Just like in the cash flow from investing activities, in the activities of
financing the procedure applied is the same as that applied in the direct method.
Let's suppose:
Capitalization through issuance of shares: 60,000
Sale of bonds: 40,000
Payment of financial obligations: 80,000
Payment of shares: 10,000
Then,
60,000
(+) 40,000
-80,000
-10,000
Cash generated from financing activities = 10,000
We now proceed to consolidate:
Efectivo generado en actividades de operación: 86.000
Cash generated from investment activities: 90,000
Cash generated from financing activities: 10,000
TOTAL CASH FLOW GENERATED BY THE COMPANY = 186,000
This total should be compared with the balances shown by the accounting books in the
accounts that are considered cash, which are generally those of group 11 of the single plan
of accounts for merchants.
It is important to note that the only difference between the two methods [direct and indirect] is
in the procedure applied in the operational activities, since in the activities
In investment and financing, the procedure is the same in both methods.
Note. In order to develop the cash flow statement, it is necessary to have the balance.
general of the last two years and the income statement of the last year. Here we have
omitted due to space limitations, and for that reason, work has been done with assumed values,
which does not invalidate the procedure that must be followed.
7. The statement of cash flows
The statement of cash flows is one of the new annual accounts that has
incorporated the commercial reform of the year 2007.
It is a statement that informs about the use of monetary assets.
representatives of cash and other equivalent liquid assets classifying the
movements by activities and indicating the net variation of that magnitude in the
exercise.
Although it is a new legal obligation, it is a financial statement.
widely addressed in the accounting literature and studied in all curricula of
studies, usually within the subject of financial statements analysis.
It is commonly referred to as cash flow statement or cash flow statement.
The cash flow statement somewhat replaces the table of
financing included in the PGC 1990 report, although the cash flow statement
cash is not contained within memory but is configured as
an annual account in itself.
The financing statement explains the variation in working capital through the
variations of permanent elements (non-current in the PGC 07) of
balance. For its part, the cash flow statement explains the variation of
cash. Without a doubt, cash is a much more intuitive and easy magnitude to
to understand that the concept of working capital, hence there is a large
majority of professionals who advocate for the inclusion of the statement of cash flows
effective against the financing framework, although other options could also have been considered.
maintained both states, as some professionals have argued
accounting. The legislator, however, has chosen to establish only the
obligation to prepare the statement of cash flows, although it will not be mandatory
for those companies that can formulate the abbreviated balance model,
memory and statement of changes in net equity.
Cash and other equivalent liquid assets are understood as such
are listed in the balance under subsection B VII, that is, the treasury deposited in the
company cash and sight bank deposits; they will also be able to form
part the financial instruments that are convertible into cash and that in the
at the time of its acquisition, its maturity was not to exceed three months,
as long as there is no significant risk of value changes and they are part of the
normal treasury management policy of the company.
The statement of cash flows establishes three classes of cash flows:
• Cash flows from operating activities (CFO).
• Cash flows from investing activities (CFIA).
• Cash flows from financing activities (CFFA).
The net increase or decrease in cash or cash equivalents will be the algebraic sum.
of the three types of flows:
Net increase/decrease in cash or equivalents =
= ± FEAE ± FEAI ± FEAF
As has been repeatedly mentioned, the PGC 07 is inspired
in the IFRS/IAS, and in the case of the cash flow statement it could not be otherwise
format. IAS 7 is entirely devoted to the preparation of the so-called statement
of cash flows and establishes different alternatives for its preparation.
Establish two possible ways to formulate this financial statement, direct method and
indirect method, although it recommends the first of both as it considers that
provides a higher level of information.
The direct method consists of separating the main concepts of receipts and payments.
in gross terms, while in the indirect method the collections are not detailed
and payments are made directly, but based on the result, a series of
adjustments to reconcile that result with the cash flow.
The statement of cash flows uses the indirect method to determine the flows.
of operating cash flow, against the recommendation of the IAS, without giving
no justification for it. Furthermore, unlike what the IFRS/IAS do,
a standardized and mandatory format is established. As for the other two types
of flows, of investment or of financing, the method used is the direct one.
7.1. Cash flows from operating activities
The cash flows from operating activities are fundamentally the
caused by the transactions involved in the determination of
company's result. The variation in cash flow caused by these
activities will be shown by their net amount, except for the following flows,
of which will be informed separately:
• Interest (charges or payments).
• Dividends received.
• Taxes on profits.
The flows corresponding to these items are therefore presented by the method
direct
The model of this part of the cash flow statement included in the PGC is the
next
A) CASH FLOWS FROM ACTIVITIES OF Notes 200X 200X-
EXPLOITATION 1
1. Result of the exercise before taxes.
2. Adjustments of the result.
a) Amortization of fixed assets (+).
b) Value adjustments for impairment (+/–).
c) Variation of provisions (+/–).
d) Attribution of subsidies (–)
e) Results from reductions and divestitures of
immobilized (+/–).
f) Results from disposals and divestments of
financial instruments (+/–).
g) Financial income (–).
h) Financial expenses (+).
i) Exchange rate differences (+/–).
j) Variation of fair value in instruments
financial (+/–).
k) Other income and expenses (–/+).
3. Changes in working capital.
a) Stocks (+/–).
b) Debtors and other accounts receivable (+/–).
c) Other current assets (+/–).
d) Creditors and other accounts payable (+/–).
e) Other current liabilities (+/–).
f) Other non-current assets and liabilities (+/–).
4. Other cash flows from activities of
exploitation.
a) Interest payments (–).
b) Dividend collections (+).
c) Interest collections (+).
d) Payments (collections) for profit tax (–/+).
5. Cash flows from operating activities
(+/- 1 +/- 2 +/- 3 +/- 4).
Comments
1. Result of the exercise before taxes. It is the figure from which we start.
to calculate the cash flows from operating activities.
2. Adjustments to the result. They can be divided into three types of adjustments:
• a) b) c) d) i) j) k): are used to eliminate expenses or income that do not represent
variation in cash.
• e) f): these adjustments are made to eliminate operations that should be
qualified as investment or financing.
• g) h): adjustments to eliminate the results related to compensation of
financial assets and liabilities whose flows must be reported separately in
this state.
3. Changes in working capital. This involves adjusting the variations that have occurred.
in working capital as a result of the difference between actual current
and the monetary flow. For these purposes, the following adjustments will need to be made:
--------
Increase in current assets Negative adjustment
>
--------
Decrease in current assets Positive adjustment
>
--------
Increase in current liabilities Positive adjustment
>
--------
Decrease in current liabilities Negative adjustment
>
4. Other cash flows from operating activities. They include the
interests charged or paid as well as the dividends received that have been
previously adjusted from the result, and that are showcased in this section of
direct form.
Payments for profit taxes are also included, which have not occurred.
need to adjust beforehand, since it starts from the benefit before
taxes.
5. Cash flows from operating activities. It will be the sum
Algebraic of the four previous sections: FEAE = ±1 ±2 ±3 ±4.
7.2. Cash flows from investing activities
This section will include payments originating from the acquisition of
non-current assets such as intangible assets, tangible assets, investments
real estate or financial investments, as well as the payments resulting from it
alienation or its amortization at maturity (in the case of investments held)
until its expiration).
This part of the cash flow statement is prepared using the direct method, and the
The normalized model that appears in the PGC is as follows:
B) CASH FLOWS FROM ACTIVITIES OF Notes 200X 200X-
INVESTMENT 1
6. Payments for investments (–).
a) Group and affiliated companies.
b) Intangible assets.
c) Tangible fixed assets.
d) Real estate investments.
e) Other financial assets.
f) Non-current assets held for sale.
g) Other assets.
7. Collections from divestments (+).
a) Group and associated companies.
b) Intangible assets.
c) Tangible assets.
d) Real estate investments.
e) Other financial assets.
f) Non-current assets held for sale.
g) Other assets.
8. Cash flows from investing activities (7-
The variation in cash and other liquid equivalents caused by the
acquisition or disposal of a set of assets and liabilities that make up a
business or line of activity will be included, if applicable, as a single item in the
investment activities, in the section of investments or divestments according to
correspondingly, creating a specific budget for that purpose.
7.3. Cash flows from financing activities
Cash flows from financing activities are defined as the collections
resulting from the acquisition by third parties of securities issued by the
company or resources granted by financial entities or third parties, in the form of
of loans or other financing instruments, as well as the payments made
for amortization or return of the amounts contributed by them. They will appear
also as cash flows from financing activities, the payments in favor
from the shareholders in the form of dividends.
Also in this case by the direct method, and the normalized model that appears
in the PGC it is the following:
C) CASH FLOWS FROM ACTIVITIES OF Notes 200X 200X-
FINANCING 1
9. Collections and payments for equity instruments.
a) Issuance of equity instruments.
b) Amortization of equity instruments.
c) Acquisition of equity instruments.
d) Alienation of equity instruments
own.
e) Subsidies, donations, and legacies received.
10. Collections and payments for liability instruments
financial.
a) Emission
1. Obligations and similar values (+).
2. Debts with credit entities (+).
3. Debts with group and associated companies (+).
4. Others (+).
b) Refund and amortization of
1. Obligations and similar values (–).
2. Debts with credit entities (–).
3. Debts with group companies and associates (–).
4. Others (–).
11. Payments for dividends and remuneration of others
heritage instruments.
a) Dividends (–).
b) Compensation for other instruments of
heritage (-).
12. Cash flows from financing activities
(±9 ±10–11).
Regarding non-monetary transactions, the report will inform about the
significant investment and financing operations that, due to not having resulted
cash variations, have not been included in the cash flow statement
cash. For example, the PGC mentions the conversion of debt into equity or the
acquisition of an asset through a financial lease.
When the company has debt with special characteristics, the cash flows of
cash proceeds from this will be included as cash flows from activities
financing in a specific item called 'Debts with characteristics
specials," under heading 10, "Increases and decreases in instruments
of financial liability.
The collections and payments arising from revolving financial assets and liabilities
Elevated amounts may be shown as net, provided that this is reported in the memorandum.
It is considered that the rotation period is high when the time between the date
of acquisition and the expiration does not exceed six months.
The flows from transactions in foreign currency will be converted to the
functional currency at the exchange rate in effect on the date each occurred
flow in question, without prejudice to being able to set a weighted average if there is a
high volume of transactions.
The company must report any significant amounts of its balances of
cash and other liquid assets equivalent to cash that are not available
to be used.
When there is an accounting hedge, the cash flows from the hedging instrument are
will be included in the same item as those of the covered item, indicating in the
memory this effect.
In the case of interrupted operations, they will be detailed in the corresponding note.
from memory the flows of the different activities.
7.4. The cash flow statement in the PGC versus the statement
of cash flows in IAS 7
Although they are two very similar financial statements, there are some differences.
between the cash flow statement regulated in the General Chart of Accounts and the one established in
the international accounting standards. Firstly, the IAS justifies the
the need to prepare a statement of this nature based on the needs of
the users of financial information and develops the possible uses of the
information it provides. The PGC is limited to establishing the content of this
annual account without establishing any reason to justify its formulation.
The PGC model is less discretionary than the NIC model, as it eliminates
alternatives and a closed model is established, although the cash flows that
establishes have the same structure in both cases, distinguishing the three types
of the flows commented on earlier:
• Cash flows from operating activities.
• Cash flows from investment activities.
• Cash flows from financing activities.
The NIC recommends a direct calculation method for the various flows. The PGC
however, it has opted for an indirect method to calculate the flows of
exploitation and direct for those of investment and financing.
As has been common in the adaptation of the IFRS, in those cases where
there are various alternatives, the PGC has chosen to leave only one option. This is
what has happened with interest and dividends as can be seen in the
next frame:
Concept NIC 7 Alternatives PGC
Interest paid Operating cash flows or Flows of
exploitation
Financing flows
Interest charged Operating cash flows or Flows of
exploitation
Investment flows
Dividends Operating flows or Flows of Flows of
charged investment exploitation
Dividends Operating cash flows or Flows of
satisfied financing
Funding flows
In our opinion, it would have been more logical to consider the paid interests as
financing flows while both receipts from interest and from
Dividends should be investment flows. Regarding the satisfied dividends.
We find your inclusion as funding flows to be completely appropriate.
By including the PGC the interests, both received and paid, and the dividends.
charged as operating flows, there is a contradiction between the account of
Losses and gains that include these expenses or income as results
financial and the cash flow statement that includes them as receipts or payments
of exploitation. Although they are two different annual accounts, we consider
it would have been more coherent not to include financial results in the flows of
exploitation.
EXAMPLE 2
Statement of cash flows
The company 'EFESA' presents the following financial statements:
BALANCE SHEET OF 'EFESA' (in millions of currency units)
31-12-n 31-12-(n-1)
NON-CURRENT ASSET 1.814 1.606
Fixed assets 2.360 2.060
Less accumulated depreciation (*) -546 -454
CURRENT ASSET 2.260 1.600
Stock 900 700
Clients 1.228 800
Treasury 132 100
TOTAL ASSET 4.074 3.206
In the balance sheet model of the PGC, fixed assets would be listed at their net value, that is,
deducted the accumulated depreciation. The depreciation data would be deducted from the memory.
31-12-n 31-12-(n-1)
NET WORTH 2.279 2.082
Social capital 1,400 1,400
Reservations 682 500
Profit and Loss 197 182
CURRENT LIABILITIES 1.795 1.124
Suppliers 830 606
Creditors for services 118 92
Bank debts 847 426
TOTAL LIABILITIES AND NET EQUITY 4.074 3.206
PROFIT AND LOSS ACCOUNT OF 'EFESA' (millions of monetary units)
31-12-n 31-12-(n-1)
Sales 6.400 4.800
Cost of sales -4.544 -3.360
Other operating expenses -1.408 -1.104
Depreciation of fixed assets -92 -46
Operating profit (EBIT) 356 290
Financial expenses -74 -30
Profit before taxes 282 260
Taxes -85 -78
Profit after taxes 197 182
Using the above data, prepare the cash flow statement of the company.
"EFESA" during exercise no.
A) CASH FLOWS FROM OPERATING ACTIVITIES
1. Result before tax 282
2. Adjustments to the result 166
a) Amortizations 92
b) Financial expenses 74
3. Changes in working capital -378
a) Inventory –
200
b) Debtors and accounts receivable
–
c) Creditors and accounts payable 428
250
4. Other cash flows from operating activities -159
a) Interest payments -74
b) Payments for corporate tax -85
5. Cash flows from operating activities (1+2+3+4) -89
B) CASH FLOWS FROM INVESTING ACTIVITIES
Payments for investments
a) Tangible assets -300
7. Collections from divestitures 0
8. Cash flows from investing activities (7-6) -300
C) CASH FLOWS FROM FINANCING ACTIVITIES
9. Increases and decreases in equity instruments 0
10. Increases and decreases in liabilities instruments 421
financial
0
11. Payments for dividends and other equity instruments
421
12. Cash flows from financing activities (9+10-11)
D) EFFECTS OF CURRENCY EXCHANGE RATE VARIATIONS 0
E) NET INCREASE/DECREASE IN CASH OR EQUIVALENTS (A 32
+ B + C + D)