Page 491 - SBR Integrated Workbook STUDENT S18-J19

Answers

Chapter 21

Example 1

Cash equivalents

High-interest bank account

The $5 million is readily convertible to a known amount of cash. It should be
classified as a cash equivalent.

Equity shares

Equity shares are a type of investment. Moreover, they have a significant risk
of a change in value. As such, they are not a cash equivalent. The amount
paid for the shares should be presented in ‘cash flows from investing
activities’.

Example 2

Acquisitions and disposals

$m
Increase in inventories
($670m – $500m – $50m + $20m) (140)
Decrease in receivables
($290m – $480m – $40m + $10m) 220

Decrease in payables
($310m – $290m – $60m + $30m) (10)

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