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Chapter 17

IAS 7 Statement of cash flows

IAS 7 Statement of cash flows requires companies to prepare a statement of cash
flows as part of their annual financial statements. The statement of cash flows must
be presented using standard headings:

 Cash flows from operating activities (either direct or indirect method)

 Cash flows from investing activities

 Cash flows from financing activities

 Identification of the net increase or decrease in cash and cash equivalents.

Note that the net increase or decrease in cash and cash equivalents for the year is
reconciled with the cash and cash equivalents at the start and at the end of the
reporting period.

There are two methods of reconciling cash from operating activities, the direct
method and the indirect method. The classification and presentation of cash flows
relating to investing activities and financing activities is the same irrespective of
which method has been used to present cash generated from operations.

You need to be aware of both methods of classifying cash flows from operating
activities.

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