FRS 107 IE*

Illustrative Examples on
FRS 107 Statement of Cash Flows

These Illustrative Examples accompany, but are not part of, FRS 107.

FRS 107 is based on IAS 7 Statement of Cash Flows. In approving FRS 107,
MASB considered and concurred with the provisions of IAS 7.

The IASB’s Illustrative Examples on implementing IAS 7 are reproduced

below for reference.

* This version does not contain changes to Standards with an effective date
after 1 January 2016.

Readers seeking a version that includes amendments to Standards that have

an effective date after 13 January 2016 should refer to FRS 107 IE.
IAS 7 IE

Illustrative examples
These illustrative examples accompany, but are not part of, IAS 7.

A Statement of cash flows for an entity other than a financial

institution
1 The examples show only current period amounts. Corresponding amounts for
the preceding period are required to be presented in accordance with IAS 1
Presentation of Financial Statements.

2 Information from the statement of comprehensive income and statement of

financial position is provided to show how the statements of cash flows under
the direct method and indirect method have been derived. Neither the
statement of comprehensive income nor the statement of financial position is
presented in conformity with the disclosure and presentation requirements of
other Standards.

3 The following additional information is also relevant for the preparation of the
statements of cash flows:

● all of the shares of a subsidiary were acquired for 590. The fair values of
assets acquired and liabilities assumed were as follows:

Inventories 100
Accounts receivable 100
Cash 40
Property, plant and equipment 650
Trade payables 100
Long-term debt 200

● 250 was raised from the issue of share capital and a further 250 was
raised from long-term borrowings.

● interest expense was 400, of which 170 was paid during the period. Also,
100 relating to interest expense of the prior period was paid during the
period.
● dividends paid were 1,200.
● the liability for tax at the beginning and end of the period was 1,000 and
400 respectively. During the period, a further 200 tax was provided for.
Withholding tax on dividends received amounted to 100.

● during the period, the group acquired property, plant and equipment
with an aggregate cost of 1,250 of which 900 was acquired by means of
finance leases. Cash payments of 350 were made to purchase property,
plant and equipment.

● plant with original cost of 80 and accumulated depreciation of 60 was

sold for 20.
● accounts receivable as at the end of 20X2 include 100 of interest
receivable.

B1080 姝 IFRS Foundation

 IAS 7 IE

Consolidated statement of comprehensive income for the period ended

20X2(a)
Sales 30,650
Cost of sales (26,000)

Gross profit 4,650

Depreciation (450)
Administrative and selling expenses (910)
Interest expense (400)
Investment income 500
Foreign exchange loss (40)

Profit before taxation 3,350

Taxes on income (300)

Profit 3,050

(a) The entity did not recognise any components of other comprehensive income in the
period ended 20X2

Consolidated statement of financial position as at end of 20X2

20X2 20X1
Assets
Cash and cash equivalents 230 160
Accounts receivable 1,900 1,200
Inventory 1,000 1,950
Portfolio investments 2,500 2,500
Property, plant and equipment
at cost 3,730 1,910
Accumulated depreciation (1,450) (1,060)

Property, plant and equipment

net 2,280 850

Total assets 7,910 6,660

Liabilities
Trade payables 250 1,890
Interest payable 230 100
Income taxes payable 400 1,000
Long-term debt 2,300 1,040

Total liabilities 3,180 4,030

continued...

姝 IFRS Foundation B1081

IAS 7 IE

...continued

Consolidated statement of financial position as at end of 20X2

20X2 20X1
Shareholders’ equity
Share capital 1,500 1,250
Retained earnings 3,230 1,380

Total shareholders’ equity 4,730 2,630

Total liabilities and

shareholders’ equity 7,910 6,660

Direct method statement of cash flows (paragraph 18(a))

20X2
Cash flows from operating activities
Cash receipts from customers 30,150
Cash paid to suppliers and employees (27,600)

Cash generated from operations 2,550

Interest paid (270)
Income taxes paid (900)

Net cash from operating activities 1,380

Cash flows from investing activities

Acquisition of subsidiary X, net of cash acquired
(Note A) (550)
Purchase of property, plant and equipment (Note B) (350)
Proceeds from sale of equipment 20
Interest received 200
Dividends received 200

Net cash used in investing activities (480)

continued...

B1082 姝 IFRS Foundation

 IAS 7 IE

...continued

Direct method statement of cash flows (paragraph 18(a))

20X2
Cash flows from financing activities
Proceeds from issue of share capital 250
Proceeds from long-term borrowings 250
Payment of finance lease liabilities (90)
Dividends paid(a) (1,200)

Net cash used in financing activities (790)

Net increase in cash and cash equivalents 110

Cash and cash equivalents at beginning of
period (Note C) 120

Cash and cash equivalents at end of period

(Note C) 230

(a) This could also be shown as an operating cash flow.

Indirect method statement of cash flows (paragraph 18(b))

20X2
Cash flows from operating activities
Profit before taxation 3,350
Adjustments for:
Depreciation 450
Foreign exchange loss 40
Investment income (500)
Interest expense 400

3,740
Increase in trade and other receivables (500)
Decrease in inventories 1,050
Decrease in trade payables (1,740)

Cash generated from operations 2,550

Interest paid (270)
Income taxes paid (900)

Net cash from operating activities 1,380

continued...

姝 IFRS Foundation B1083

IAS 7 IE

...continued

Indirect method statement of cash flows (paragraph 18(b))

20X2
Cash flows from investing activities
Acquisition of subsidiary X net of cash acquired
(Note A) (550)
Purchase of property, plant and equipment (Note B) (350)
Proceeds from sale of equipment 20
Interest received 200
Dividends received 200

Net cash used in investing activities (480)

Cash flows from financing activities

Proceeds from issue of share capital 250
Proceeds from long-term borrowings 250
Payment of finance lease liabilities (90)
Dividends paid(a) (1,200)

Net cash used in financing activities (790)

Net increase in cash and cash equivalents 110

Cash and cash equivalents at beginning of
period (Note C) 120

Cash and cash equivalents at end of period

(Note C) 230

(a) This could also be shown as an operating cash flow.

Notes to the statement of cash flows (direct method and

indirect method)

A. Obtaining control of subsidiary

During the period the Group obtained control of subsidiary X. The fair values of assets
acquired and liabilities assumed were as follows:

B1084 姝 IFRS Foundation

 IAS 7 IE

Cash 40
Inventories 100
Accounts receivable 100
Property, plant and equipment 650
Trade payables (100)
Long-term debt (200)

Total purchase price paid in cash 590

Less: Cash of subsidiary X acquired (40)

Cash paid to obtain control net of cash acquired 550

B. Property, plant and equipment

During the period, the Group acquired property, plant and equipment with an aggregate
cost of 1,250 of which 900 was acquired by means of finance leases. Cash payments of 350
were made to purchase property, plant and equipment.

C. Cash and cash equivalents

Cash and cash equivalents consist of cash on hand and balances with banks, and
investments in money market instruments. Cash and cash equivalents included in the
statement of cash flows comprise the following amounts in the statement of financial
position:

20X2 20X1
Cash on hand and balances with banks 40 25
Short-term investments 190 135

Cash and cash equivalents as previously reported 230 160

Effect of exchange rate changes – (40)

Cash and cash equivalents as restated 230 120

Cash and cash equivalents at the end of the period include deposits with banks of 100 held
by a subsidiary which are not freely remissible to the holding company because of currency
exchange restrictions.

The Group has undrawn borrowing facilities of 2,000 of which 700 may be used only for
future expansion.

D. Segment information
Segment A Segment B Total
Cash flows from:
Operating activities 1,520 (140) 1,380
Investing activities (640) 160 (480)
Financing activities (570) (220) (790)

310 (200) 110

姝 IFRS Foundation B1085

IAS 7 IE

Alternative presentation (indirect method)

As an alternative, in an indirect method statement of cash flows, operating profit before
working capital changes is sometimes presented as follows:

Revenues excluding investment income 30,650

Operating expense excluding depreciation (26,910)

Operating profit before working capital changes 3,740

B Statement of cash flows for a financial institution

1 The example shows only current period amounts. Comparative amounts for the
preceding period are required to be presented in accordance with IAS 1
Presentation of Financial Statements.
2 The example is presented using the direct method.

20X2
Cash flows from operating activities
Interest and commission receipts 28,447
Interest payments (23,463)
Recoveries on loans previously written off 237
Cash payments to employees and suppliers (997)

4,224

(Increase) decrease in operating assets:

Short-term funds (650)
Deposits held for regulatory or monetary control
purposes 234
Funds advanced to customers (288)
Net increase in credit card receivables (360)
Other short-term negotiable securities (120)

Increase (decrease) in operating liabilities:

Deposits from customers 600
Negotiable certificates of deposit (200)
Net cash from operating activities before income tax 3,440
Income taxes paid (100)

Net cash from operating activities 3,340

continued...

B1086 姝 IFRS Foundation

 IAS 7 IE

...continued

20X2
Cash flows from investing activities
Disposal of subsidiary Y 50
Dividends received 200
Interest received 300
Proceeds from sales of non-dealing securities 1,200
Purchase of non-dealing securities (600)
Purchase of property, plant and equipment (500)

Net cash from investing activities 650

Cash flows from financing activities

Issue of loan capital 1,000
Issue of preference shares by subsidiary
undertaking 800
Repayment of long-term borrowings (200)
Net decrease in other borrowings (1,000)
Dividends paid (400)

Net cash from financing activities 200

Effects of exchange rate changes on cash and cash
equivalents 600

Net increase in cash and cash equivalents 4,790

Cash and cash equivalents at beginning of
period 4,050

Cash and cash equivalents at end of period 8,840

姝 IFRS Foundation B1087