IPSAS

STATEMENT OF CASHFLOW (IPSAS 2)

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 Objective
To prescribe the presentation of information about the
historical changes in the cash and cash equivalents of
an entity as at the reporting date. In the cash flow
statement an entity classifies cash flows during the
period according to operating, investing, and financing
activities.

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 Scope
Applied by entities that prepare and present financial
statements under the accrual basis of accounting.
Applies to all public sector entities other than GBEs

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 Main principle of IPSAS 2
 The cash flow statement analyses changes in cash and cash equivalents
during the reported period.
 Cash and cash equivalents comprise cash on hand and demand
deposits, together with short-term, highly liquid investments that are
readily convertible to a known amount of cash, and that are subject to
an insignificant risk of changes in value.
 An investment normally meets the definition of a cash equivalent when
it has a maturity of three months or less from the date of acquisition.
 Equity investments are excluded, unless they are in substance a cash
equivalent.
 Bank overdrafts which are repayable on demand and form an integral
part of an entity's cash management are also included as a component
of cash and cash equivalents.
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 Presentation of the Statement of Cash
Flows - Classification
In the cash flow statement cash flows are classified
according to one of the following activities:
Operating activities
Investing activities
Financing activities

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Definitions
Operating activities:
Are the main cash-generating activities that are not investing
or financing activities and is a key indicator to which extent
the operations are funded by way of
a. Direct or indirect taxes
b. From the recipients of goods and services provided by the entity
 If an entity is unable to separately identify the funds that are
appropriated or authorized by the government or other public
entity into operational, financing or investing cash flows,
these should be reported as an operational cash flow with
disclosure in the notes

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 Definitions (cont…)
Investing activities: Are the acquisition and disposal of
long-term assets and other investment not included in cash
and cash flow equivalents Information about cash flows
arising from investing activities give a view on the extent to
which outflows have been made for resources that are
intended to contribute to the entity’s future service delivery.
Financing activities: are activities that changes the
contributed capital and the entity’s borrowings. The cash
flows from financing activities are an indicator of claims on
future cash flows by providers of capital to the entity

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 DIRECT METHOD

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 Cash flow from operating activities
Cash received from customers xxx
Cash paid to suppliers (xxx)
Cash paid to employees (xxx)
Other cash payments (xxx)
Cash generated from operations xxx
Interest paid (xxx)
Tax paid (xxx)
Net cash flow from operating activities xxx
 Cash flow from Investment activities
Proceeds from sale of PPE xxx
Purchase of PPE (xxx)
Purchase of investments (xxx)
Sale of investments xxx
Interest received xxx
Dividends received xxx
Net cash used in investing activities
xxx
 Cash flow from Financing activities
Proceeds from issue of shares xxx
Long-term borrowing xxx
Payment of financial lease liabilities (xxx)
Net cash flow for the year xxx
Cash and cash equivalents at the beginning of year xxx
Cash and cash equivalents at the end of year xxx
Indirect Method
(ii) The indirect method adjusts the accrual based net surplus
or deficit for the effects of non-cash transactions and could
be presented, for example, as following

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Indirect method

Cash flow from Operating activities

Surplus/Deficit xxx
Adjust for: Non Cash Items
Amortization xxx
Depreciation xxx
Provision for depreciation xxx
Increase in provision for doubtful debts xxx
Operating cash flow before working capital movements xxx
Increase/decrease in inventories (xxx)/xxx
Increase/decrease in trade receivable (xxx)/xxx
Increase/decrease in trade receivables xxx/(xxx)
Cash generated from operations xxx
Interest paid xxx
Tax paid xxx
Net cash flow from operating activities xxx
 CASH FLOWS FROM INVESTING
ACTIVITIES

Purchase of PPE Xx
Proceeds from sale of PPE Xx
Proceeds from sale of investments Xx
Purchase (xx)
Purchase of securities (Xx)
Net cash flows from investing xxxx
activities

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 CASH FLOWS FROM FINANCING
ACTIVITIES

Proceeds from borrowings Xx

Capital contributions Xx
Repayment of borrowings (Xx)
Distribution of dividend to (Xx)
government Xx
Net cash flows from financing
activities

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 Net cash flow for the year
xxx
Cash and cash equivalents at the beginning of year
xxx
Cash and cash equivalents at the end of year
xxx

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 Disclosure
Interest, Dividends or Similar Distributions
Interest and dividends (or similar distributions) received and
paid have to be disclosed separately.
They may be classified as operating, investing, or financing
cash flows, provided that they are classified consistently
from period to period.

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 Taxes on net surplus
Taxes on net surplus shall be disclosed separately and
are normally classified as a cash flow from operating
activities, unless they can be specifically identified
with financing or investing activities.

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 Acquisitions and Disposals
Aggregate cash flows related to acquisitions and disposals of
controlled entities and other operating units should be
presented separately and classified as investing activities.
Following specific disclosures are required:
Aggregate amount of the consideration
Total amount of the consideration discharged by cash
Amount of cash and cash equivalents acquired or disposed of
Amount of assets and liabilities other than cash and cash
equivalents, per major category recognized in the entity acquired
disposed of

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 Disclosures
An entity is required to present the components of cash
and cash equivalents and the reconciliation to the
amounts included in the statement of financial position
Year X+1 Year X
$000 $000

Cash at bank and in hand Xx Xx

Short term deposits Xx Xx
Short term investments Xx Xx
Total cash and cash equivalents Xx Xx

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Other Disclosures
The amount of cash and cash equivalents held by the entity
that is not available for use by the economic entity should be
disclosed, together with a commentary by management

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 END OF PRESENTATION

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