Chapter 37 - Statement of Cash Flows: CHAPTER 37 STATEMENT OF CASH FLOWS TOPIC OVERVIEW: its contents and its This chapter discusses statement of cash flows, preparation under the direct and indirect method. LEARNING OBJECTIVES: After studying this chapter, you should be able to: 1. Describe statement of cash flows and enumerate the three classifications of cash flows. : : Explain the component of method of presentation of operating cash flows, financing cash flows and investing cash flows. 3. Prepare statement of cash flows. Differentiate the statement of cash flows under PFRS for SME and full 4, PFRS. STATEMENT OF CASH FLOWS The statement of cash flows is part of the complete set of financial statements and is required for all entities who prepare financial statements in conformity with PFRSs. The statement of cash flows analyses changes in cash and cash equivalents during a period. Cash flows are inflows and outflows of cash and cash equivalents. 2 OVERVIEW OF THE STATEMENT OF CASH FLOWS (SCF) | cashand cash ‘equivalents, ending Se | Cashand cash ‘equivalents, beginning Cash flows (inflows or outflows) - r Components ofSCF Operating cash flows | | mvesting cash ows | Financing cash flows L GENERALLY caused by [current assets | + Non-currentiabilies changes of: «Current liabilities | Non-currentassets | |’ shareholder's Equity Co erte bated | Method of presentation | Direct Method OR [, e react | | pected DireeMetod ba) Lee 1534 Scanned with CamScannereee yaptet 32 = Statement of Cash roy, Sh Flows SpERATING ACTIVET Pee ae wating activities are the yy nity and other activities thatareeat Tevenue-producing activities of the Not inves 1 ot Investing or financing activities. o Methods of Presentatig ‘ation for Operatin, i Activities | tity shall report cas | Be , Thay from o ing activities using either: eby oe ing a either: receipts ands", Classes of gross cash Encouraged disclosed °'°SS ©Sh payments are | by PAS7 Indirect method Whe 7 ee or loss is adjusted for | Commonly cash nanan transactions of a non- | used re re, any deferrals or accruals | actual pes o future operating cash | practice inca ts OF Payments, and items of i Or expense associated with investing or financing cash flows. in Ents ot method en .© report cas flows from operating activities using the dire ethod because it provides information which may be useful in eet future cash flows and which is not available under the indirect method. Examples of Cash Flow from Operating Activities According to Par. 14 of PAS 7, cash flows from operating activities are primarily derived from the principal revenue-producing activities of the entity. Therefore, they generally result from the transactions and other "events that enter into the determination of profit or loss. Examples of cash ___ flows from operating activities are: | @ cash receipts from the sale of goods and the rendering of services; (b) cash receipts from royalties, fees, commissions and other revenue; | (cash payments to suppliers for goods and services; | @ cash payments to and on behalf of employees; (©) cash receipts and cash payments of an insurance entity for premiums | and claims, annuities and other policy benefits; (9 cash payments or refunds of income taxes unless they can be specifically identified with financing and investing activities; and (@) cash receipts and payments from contracts held for dealing or trading purposes. Some transactions, such as the sale of an item of plant, may give rise to gain or loss that is included in recognized profit or loss. The cash flows relating to such transactions are cash flows from investing activities. An entity may hold securities and loans for dealing or trading purposes, in which case they are similar to inventory acquired specifically for resale Therefore, each lows arising from the purchase and sale of dealing or 1535 Ee es’ | Scanned with CamScannerChapter 37 - Statement of Cash Flows fied as operating activities. Similarly, cash tions are usually classified as in revenue-producing activity trading securities are cl advances and loans made by financial institu operating activities since they relate to the ma of that entity. Property, Plant and Equipment that are routinely sold after rental Property, plant and equipment that are routinely sold after rental are treated just like inventory. The proceeds are added to sales, and the book value at initial measurement is treated as inventory and expensed in the form of cost of goods sold when sold. Cash payments to manufacture or acquire the Operating cash outflow assets : Cash receipt from sale Operating cash inflow Special Notes on Taxes, Interest and Dividends: Items interest | Received | Operating | OR | Investing : interest | Paid Operating | OR | Financing or Investing Received | Operating | OR | Investing Dividend [paid Financing | OR | Operating _ Refund | Operating | OR| Financing or _investing Tax Paid Operating | OR | activities if they can be specifically identified Notes: Y Fora financial institutions (e.g, banks), interest paid, interest received and dividends received are usually classified as operating cash flows. Y Interest paid may be included as part of investing cash flows if it was capitalized as part of an asset (e.g, borrowing cost). Tentative amendment by the IFRS Board (Agenda Paper 21C): Classification of interest and dividends in the statement of cash flows For non-financial entities, the Board tentatively decided to: ‘a. remove from IAS 7 Statement of Cash Flows options for the classification of interest and dividends paid and of interest and dividends received and prescribe a single classification for each of these items. b. clarify that: cash flows arising from interest incurred on financing activities should be classified as financing cash flows. cash flows arising from interest paid that is capitalized as part of the cost of an asset should be classified as financing cash flows. cash flows arising from dividends paid should be classified as financing cash flows. 1536 Scanned with CamScannerchapter 37 — Statement of Cash Flows amend the definition of “Investin _—————— and dividends received should pa cycles In AS 7 since these Provisions are not yor final, we sample: Direct Method of Present, ra Sales ‘entation for Operating Activities to clarify that interest ied as investing cash flows will Still use the current provisions. ection of accounts and 5 ba eeaien ofinterest * 'ecelvable xX Cash dividend from associate a ‘ash proceeds from sale of tradi ‘ eeieetion of royalty adding securities xX Collection of commission ie proceeds from insurance i cash dividend from other investment xx payment of accounts payable oo payment of salaries x) Payment of rent (xX) Payment of taxes (xx) Payment of trading securities 00) Payment of royalty (Xx) Payment of commission 009) Payment of insurance on) Net cash provided by (or used in) operating activities — xX For the computation of collections and payments please refer to the T- accounts approach as discussed in Chapter 5: Cash and Accrual Basis. : Example: Indirect Method of Presentation for Operating Activities Net Income XX Add: Noncash Expenses Depreciation expense XX Amortization expense of intangible assets XX Impairment loss of PPE and intangible assets XX Less: Noncash Income Net Share in profit of associate XX | Amortization of unearned interest income XX Add: Amortization of discount on bonds payable XX | Amortization of premium on investment in bonds XX Less; Amortization of premium on bonds payable XX Amortization of discount on investment in bonds XX Add (or Deduct) Adjustments Salaries expense for share-based payment xx 1097 Scanned with CamScannerChapter 37 - Statement of Cash Flows. tment property using fair value Xx Unrealized loss (or gain) on inve model Cash dividend from associate Decrease (or Increase) in Accounts receivable Decrease (or Increase) in Inventory Decrease (or Increase) in Prepayments Decrease (or Increase) in Trading securities Decrease (or Increase) in Deferred tax asset Loss (or Si on py of fair value through other comprehensive income securities i Loss (or Gain) on sale of Investment in associate Loss (or Gain) on sale of land Loss (or Gain) on sale of Building Loss (or Gain) on sale of equipment Loss (or Gain) on sale of intangible asset Loss (or Gain) on settlement of bond payable Increase (or Decrease) in Accounts payable Increase (or Decrease) in Notes payable-trade Increase (or Decrease) in Accrued expenses Increase (or Decrease) in income tax payable Increase (or Decrease) in deferred tax payable Net cash provided by (or used in) operating activities plese essen 33 35 83 £5 85 5535 Noncash Expenses Anoncash expense does not result in outflow of cash. A common example is depreciation, amortization and depletion. These items decreases net income but since there is no cash involved, these items shall be added back to the net income in computing for the operating cash flows. Amortization of discount on bonds payable and Amortization of premium on investment in bonds Amortization of discount on bonds payable and amortization of premium on investment in bonds decrease the net income as shown by the following entries, but since there is no cash involved, the same shall be added to the net income in computing for the operating cash flows. Premium on Investments in Bonds: XX Interest income XX XX Investment in bonds Discount on Bonds Payable: Interest expense Discount on B/P XX Amortization of premium on bonds payable and amortization of discount on investment in bonds Amortization of premium on bonds payable and Amortization of premium on investment in bonds increase the net income as shown by the following 1538 Scanned with CamScannernt 5 but since there thenet income in compy ting for the , the same shall be deducted from operati premium on Bonds Payable; Perating cash lows, premium on BP x Premium on investment in bonds: raterest expense xy Mvestment in bonds xX Interest crease (Or Decrease) in Current A, ae o Conversety, decrease in current assets, for example decrease in accounts receivable is due to collection greater than credit sales. Since the smaller amount (i.e, credit sales) enter into the determination of net income, the decrease in accounts receivable shall be added from the net income in computing for the operating cash flows, Increase (or Decrease) in Current Liabilities Increase in current liabilities, for example increase in accounts payable is due to credit purchases greater than payments. Since the larger amount (ie., credit purchase) enters into the determination of net income, the increase in accounts payable should be added from the net income in computing for the operating cash flows. Conversely, decrease in current liabilities, for example decrease in accounts payable is due to payments greater than credit. Since the smaller amount (ie, credit purchase) enters into the determination of net income, the decrease in accounts payable should be deducted from the net income in computing for the operating cash flows. INVESTMENT IN ASSOCIATE AND JOINT VENTURE Cash Dividend Received from an Associate and Joint Venture Cash dividend from an associate is included as an operating cash flow. In accounting for the investment using the equity method, the entry to record cash dividend received from an associate includes a debit to “cash” and credit to “investment in associate” account, Since the recording of this dividend did not affect net income, this should be added in computing the operating cash flow. Net share in profit of associate and joint venture - The net share in the profit of associate or joint venture increases the net income as shown by the following journal entries, but since there is no cash 1539 Scanned with CamScanner1 Chapter 37 - Statement of Cash Flows ; involved, the same shall be deducted from the net income n computing the operating cash flow. XX Share in the net income: Investment in Associate/Joint Venture F Investment income Amortization of undervalued assets on the acquisition: x XX Investment income Investment in Associate/Joint Venture Summary of Cash inflows and outflows affecting Investment in Associate ir i ent ae Direct Method Indirect Method (OPERATING) (OPERATING) Cash dividend 7 a received Share in net profit of} Notincludedinthe | Deducted from the net Lassociate computation income Acquisition and sale of Investment in Associate or Joint Venture is included as part of investing activity. Trading Securities (TS) or Financial Asset through Profit or Loss (EVTPL): Operating (including dividends received): Direct Method Cash dividend received Add Cash acquisition of Trading securities Deduct, Cash Sale of Trading securities Add Item Indirect method No need to add or deduct in the Net income Cash dividend received Total increase in T/S or Deduct from the net income FVTPL Total decrease in T/S or | Add to the net income FVTPL. Unrealized gain No need to add or deduct in the Net income No need to add or deduct in the Net income Unrealized loss Realized gain on sale Realized loss on sale Notes: “Unrealized gain or loss is ignored since they are already taken up in the total increase or decrease in the trading securities. Realized gain or loss on sale is ignored since they already are included in the net income, No need to add or deduct in the Net income No need to add or deduct in the Net income 1540 Scanned with CamScannercaplet 37_— Statement of Cash Flows amet sae Goss) ku Sale of Financial Asset at fair value through i << come (FA at FVTOCI) under the indirect me! Debt Equity* ypssonsale Add Ignore sinon sale Deduct Ignore emhis is known as investment in equity desi i ' hs Serene quity designated as at fair value through WSTRATION 1: Indirect Method ‘he following information relates to Bryse Co. for last year: Netincome : 256,000 Net decrease in all current assets except cash 28,000 et increase in current liabilities 64,000 pividends paid on ordinary shares 40,000 Cash Acquisition of land 150,000 Depreciation expense 32,000 Loss on sale of machinery 20,000 Required: Compute for Bryse Co.'s net cash provided (used) by operating activities for last year on the statement of cash flows (Assume that current liabilities do not contain any non-trade notes payable) SOLUTION: Netincome 256,000 Net decrease in all current assets except cash 28,000 Net increase in current liabilities 64,000 Depreciation expense 32,000 Loss on sale of machinery 20,000 Net cash provided by operating activities 400,000 Cash Acquisition of land is part of financing activity. ILLUSTRATION 2: Indirect Method Raclette Company's net income last year was P100,000 and cash dividends declared and paid to the company's stockholders totaled P40,000. Increases (Decreases) Debit balances: Accounts receivable (P24,000) Prepaid expenses (4,000) Inventory 8.00 ‘nvestment at fair value through other comprehensive Toh income ; 1s41 Scanned with CamScannerChapter 37 - Statement of Cash Flows _ Credit balances: Accumulated depreciation p00 Accounts payable anne Taxes payable information, compute for the net cash Required: Based solely on this dcilcteh provided by operations under the indirect method on the statement of cash flows. SOLUTION: Net income P 100,000 Decrease in accounts receivable 24,000 Decrease in prepaid expenses 4,000 Increase in inventory (8,000) Increase in accumulated depreciation-depreciation exp soo Increase in accounts payable 000 Decrease in taxes payable £20,000) 2184000 Net cash provided by operating activities INVESTING ACTIVITIES Investing activities are the acquisition and disposal of long-term assets and other investments not included in cash equivalents. Examples of cash flows arising from investing activities The separate disclosure of cash flows arising from investing activities is important because the cash flows represent the extent to which expenditures have been made for resources intended to generate future income and cash flows. Examples of cash flows arising from investing activities are: (a) cash payments to acquire property, plant and equipment, intangibles and other long-term assets. These payments include those relating to capitalized development costs and self-constructed property, plant and equipment; (b) cash receipts from sales of property, plant and equipment, intangibles and other long-term assets; (c) cash payments to acquire equity or debt instruments of other entities and interests in joint ventures (other than payments for those instruments considered to be cash equivalents or those held for dealing or trading purposes); (d) cash receipts from sales of equity or debt instruments of other entities and interests in joint ventures (other than receipts for those instruments considered to be cash equivalents and those held for dealing or trading purposes); 1542 Scanned with CamScannercash advances and loans mad ; ) Gnd oans made by a financial nora et Patties (other than advances fash receipts from the repayment sto parties (other a advances and loans of a financial institution); cash payments for futures contracts, forward contracts, soln ntrata and swap contracts except when the contracts are held for dealing oF a ing PurPoses, or the payments are classified as financing activities; (4) cash receipts: from futures contracts and ‘nt of advances and loans made to other @ contracts, forward contracts, option sw , dealing or trading purposes {xcept when the contracts are held for : ses, or the recei : activities, ipts are classified as financing When a contract is accounted for as a hedge of an identifiable position, the cash flows of the contract are classified in the the cash flows of the position being hedged. same manner as the ca: Direct Method of Presentation for Investing Activities proceeds from sale of fair value through other comprehensive income securities XX Proceeds from sale of Investment in associate XX Collection of Loan receivable xX Proceeds from sale of Land xX Proceeds from sale of Building XX Proceeds from sale of Equipment XX Proceeds from sale of Intangible asset xX Cash acquisition of fair value through other comprehensive income securities xX) Cash acquisition of Investment in associate (x) ~ Cash outflow - Loan Receivable (xX) Cash acquisition of Land (xx) Cash acquisition of Building (XX) Cash acquisition of Equipment (xx) Cash acquisition of Intangible asset XX) Net cash provided by (or used in) investing activities ox” ILLUSTRATION: Investing Activities The following transactions occurred last year at Jezreel Company: Cash acquisition of trading securities P 20,000 quisition of fair value through other comprehensive 25,000 es Cash acquisition of treasury shares 15,000 Interest received on the investment in bonds 6,000 Repayment of principal on the company’s own bonds 50,000 1543 Scanned with CamScannerChapter 37 - Statement of Cash Flows. Proceeds from sale of the company's used equipment pote Purchase of land above information, the net cash provided by Required: Based solely on the financing activities for the year on the statement of cash flows would be? SOLUTION: * Cash acquisition of fair value through other comprehensive securities (25,000) Proceeds from sale of the company’s used equipment 250,000 Purchase of land (440,000) 285,000 Net cash provided by investing activities FINANCING ACTIVITIES Financing activities are activities that result to changes in the size and composition of the contributed equity and borrowings of the entity. Examples of cash flows arising from financing activities The separate disclosure of cash flows arising from financing activities is important because it is useful in predicting claims on future cash. flows by providers of capital to the entity. Examples of cash flows arising from financing activities are: (a) cash proceeds from issuing shares or other equity instruments; (b) cash payments to owners to acquire or redeem the entity's shares; (¢) cash proceeds from issuing debentures, loans, notes, bonds, mortgages and other short or long-term borrowings; (d) cash repayments of amounts borrowed; and (e) cash payments by a lessee for the reduction of the outstanding liability relating to a finance lease. Other Items Finance lease liability % Principal payment is part of the cash outflow from financing activity. Y Interest payment is part of the cash outflow from operating activity. Y Principal collection is part of the cash inflow from investing activity. ¥ Interest collection is part of the cash inflow from operating activity. ¥ Principal collection is part of the cash inflow from investing activity. Y Interest collection is part of the cash inflow from operating activity. Y Principal payment is part of the cash 1544 Finance Lease Receivable Loan Receivable Loan payable Scanned with CamScanner| W yapter 37 - Statement of Cash Flows Outflow from, ¥ Interest Pay! financing activity, ‘ment is part of the cash outflow rom operati r of | |‘aéenunes |) Perating activity, Sevable (with op proceeds from sale of eecount receivable is re eco) oF cash inflow from operating activity. fas pledging bn ae Feceipt or payment is part of Cash wreivable inflow /outflow from financing activity, gxample: Direct Method of Pres, i i i i prezes fom nontrade noes sentation for Financing Activities proceeds from bonds payable “ proceeds from loans payable x proceeds from mortgage payable x Proceeds from Share capital issuance XxX Repayment of nontrade notes payable (xX) Repayment of bonds payable (x) Repayment of loans payable x) Repayment of mortgage payable (xx) Payment of treasury shares (XX) Payment of dividends Net cash provided by (or used in) financing activities NON-CASH TRANSACTIONS ‘Investing and financing transactions that do not require the use of cash or cash equivalents shall be excluded from a statement of cash flows. Such transactions shall be disclosed elsewhere in the financial statements in a way that provides all the relevant information about these investing and financing activities. Examples of non-cash transactions are: (a) the acquisition of assets either by assuming directly related liabilities or by means of a finance lease; (b) the acquisition of an entity by means of an equity issue; (0) the conversion of debt to equity; and (d) share reinvestment scheme or dividend reinvestment plan. Dividend reinvestment plan: d ; - Aplan offered by a corporation that allows investors to reinvest their cash ividends by purchasing additional shares or fractional shares on the dividend payment date in lieu of cash dividend payments. For statement of | £ash flow purposes, onsidered a non-cash transaction. 1545 Scanned with CamScannerChapter 37 - Statement of Cash Flows nancing Activities 7 at Neil Company: ILLUSTRATION: The following cctions occurred last yea Issuance of shares of the company’s own ordinary shares P 320,000 Dividends paid to the company’s own shareholders 12,000 Dividends received from investments In other companles ah shares ; Increase in investment under share reinvestment scheme 45,000 Increase in share capital under dividend reinvestment plan 67,000 Interest paid on the company's own bonds 24,000 Repayment of principal on the company’s own bonds 200,000 Proceeds from sale of the company’s used equipment 88,000 560,000 Purchase of land Required: Based solely on the provided by financing activities above information, compute for the net cash for the year on the statement of cash flows, SOLUTION: Issuance of shares of the company’s own ordinary shares P 320,000 Dividends paid to the company’s own shareholders (12,000) Repayment of principal on the company’s own bonds (200,000) 2108,000 Net cash provided by financing activities Additional Acquisition or Partial Disposal of Investment in Subsidiary A. Consolidated Financial Statement Transaction | Effect on control Classification ‘Additional | Noloss of control__| Financing cash flows acquisition _ | Loss of control Investing cash flows Partial | Nolossofcontrol___| Financing cash flows disposal__| Loss of control Investing cash flows ‘As provided under PFRS 10 paragraph 23, changes in a parent's ownership interest in a subsidiary that do not result in the parent losing control of the subsidiary are equity transactions (i.e., transactions with owners in their capacity as owners). Therefore, these transactions is accounted just like treasury share transaction and reported as part of financing activities. Separate Financial Statement In the separate financial statement, cash inflows or outflows related to additional acquisition or disposal of investment in subsidiary is presented as part of investing activities. Needless to say, transactions involving additional acquisition or partial ~ disposal of investment in associate, joint venture and financial asset at FVTOCI are reported as part of investing activities. 1546 Scanned with CamScannerapter 37 ~ Statement of Cash Fy chaot lows {LLUSTRATION: Comprehensive December 31, Ela Joy Compan, onPeish receipts from; ise) PYOvided the following data nce of Cash payments for dividends. "™"Y shares Cash receipts from issuance of 12! Cash paid for treasury shares.” ea" bonds Cash receipts for reissuance of treasi uN Cash paid to repay a loan payable Pee Cash receipt for loans payable to an 7 other compan Cash receipts from pledge of accounts receivable i Cash raider principal Payment of lease liability (0 Cash received from lessee as a principal pa finance lease receivable Terrier 41 Issuance of bonds payable for land 42 Cash receipts from repayment of loan made to another company 13 Cash paid for loan receivable made to ai 14 Cash payment to purchase land 15 Cash receipts from sale of land 16 Cash receipts from sale of equipment 17 Cash payment for equipment purchased 48 Cash receipts from sale of FVTOCI 19 Cash payment for purchase of FVTOCI 20 Cash receipts from sale of FAAC 21 Cash payment for purchase of FAAC 22. Cash payment to purchase patent 23. Cash receipt from sale of patent 24 Receipts of notes receivable for accounts receivable 25. Cash receipts from customers 26 Cash receipts from dividends on long-term investments 27 Cash payments for wages and other operating expenses 28 Cash payment for insurance 29 Cash payments for taxes 30 Cash receipts as interest 31 Cash paid as interest 32. Cash paid to suppliers 33. Cash receipts from sale of Fair Value through Profit or loss investment Cash payment for purchase of Fair Value through Profit or loss investment 35. Cash receipts from dividends-investment in associate Required: ; Based on the above date, answer the following: nother company 34 P 70,000 10,000 50,000 15,000 20,000 14,000 60,000 50,000 30,000 170,000 500,000 21,000 100,000 120,000 45,000 200,000 50,000 25,000 45,000 15,000 60,000 15,000 25,000 100,000 108,000 7,000 20,000 5,000 11,000 4,200 2,000 34,000 23,000 13,000 20,000 1) How much is the net cash provided by (or used) in operating activities? 1547 Scanned with CamScannerChapter 37 - Statement of Cash Flows. chi ‘ash provided i 2) How much is the net cash p by or) 3) by (or How much is the net cash provided SOLUTION: ‘ Requirement No. 1: Operating Activities 25 26 27 28 29 30 31 32 33 34 35 Cash receipts from customers Cash receipts from dividends on long-term investments Cash payments for wages and other operating exP Cash payment for insurance Cash payments for taxes Cash receipts as interest Cash paid as interest Cash paid to suppliers Cash receipts ‘rom sale of Fair Value through Profit or loss investment Cash payment for purchase of Fair Value through Profit or loss investment : ' Cash receipts from dividends-investment in associate Total net cash provided by operating activities Requirement No. 2: Investing Activities 10 Cash received from lessee as a principal payment of 12 13 14 15 16 17 18 19 20 21 22 23 finance lease receivable Cash receipts from repayment of loan made to another company Cash paid for loan receivable made to another company Cash payment to purchase land Cash receipts from sale of land Cash receipts from sale of equipment Cash payment for equipment purchased Cash receipts from sale of Fair Value through Other comprehensive income Cash payment for purchase of Fair Value through Other comprehensive income Cash receipts from sale of Financial asset at amortized cost Cash payment for purchase of Financial asset at amortized cost Cash payment to purchase patent Cash receipt from sale of patent Total net cash provided by investing activities Requirement No. 3: Financing Activities 1 2 Cash receipts from issuance of ordinary shares Cash payments for dividends 1548 used) in investing activities? in financing activities? 108,000 7,000 (20,000) (5,000) (11,000) 4,200 (2,000) (34,000) 23,000 (13,000) —20,000 277.200 P 170,000 21,000 (100,000) (120,000) 45,000 200,000 (50,000) 25,000 (45,000) 15,000 (60,000) (15,000) —25,000 P.111,000 P 70,000 (20,000) Scanned with CamScannerchapter 37 - Statement of Cash Flows Cash receipts from issuance of 12 ‘i %, 5-year b + Cash paid for treasury shares ‘year bonds “000 5 Cash receipts for reissuance of treasury shares 20,000 g Cash paid to repay a loan payable ane 1 Cash receipt for loans payable to another company paren 8 9 Cash receipts from pledge of accounts receivable 50,000 Cash paid for principal payment of lease liability 30,000) ‘Total net cash provided by financing activities £181,000 Note: The following are not cash flows. 41 Issuance of bonds payable for land P500,000 24 Receipts of notes receivable for accounts receivable 100,000 ADDITIONAL NOTES ON PFRS FOR SMEs All SMEs must present statement of cash flows, as part of its complete set of financial statements. Just like in full PFRS, cash flows are classified as: 1. Operating — option to use indirect or direct method 2. Financing - direct method only 3. Investing - direct method only Unlike in full PFRS, PFRS for SMEs does not explicitly: Y encourage entities to report cash flows from operating activities using the direct method Y require the reporting of particular cash flows on a net basis Scanned with CamScanner