Page 405 - F3 -FA Integrated Workbook STUDENT 2018-19

Answers

Example 1a cont.

Key issues

(1)
Ref = identified from the statement of profit or loss.
(2)
Ref = this is an accruals-based figure in the statement of profit or loss –
therefore add back to profit before tax and then deduct the cash paid in the year
as a separate item (see later) to arrive at net cash flow from operating activities.

(3)
Ref = the depreciation charge is not a cash expense – therefore add back to
profit before tax. This information may be provided in the question, or
workings/calculations may be required.

(4)
Ref = this may be disclosed on the face of the SP&L, or it may need to be
calculated from information provided. Profit or loss on disposal of PPE is not a
cash flow – deduct the profit on disposal (add back a loss on disposal) and show
the cash proceeds as a cash inflow within ‘Investing activities’.

(5)
Ref = increases in inventories and/or receivables represent a cash outflow,
and decreases in inventories and/or receivables represent a cash inflow.
Conversely, an increase in payables represents a cash inflow, whilst a decrease
in payables represents a cash outflow.

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