8/13/2019 Cash Flow-s

1/12

1

CORPORATE

FINANCIALREPORTING

23 The Cash Flow

Statement

Dilutive Securities and EPS

8/13/2019 Cash Flow-s

2/12

2

THE CASH FLOW STATEMENT

(FAS 95 or ASC 230)

Operating activities xxxx

Investing activities xxxx

Financing activities xxxx

Increase/decrease in cash xxxx

Cash, beginning of year xxx

Cash, end of the year xxxx

8/13/2019 Cash Flow-s

3/12

3

THE CASH FLOW STATEMENTOperating activities

whats not investing or financing

Investing activitiesacquiring/disposing of non-current assets (including

buying/selling Securities Available For Sale) &

lending and being repaid the principal amount loaned

Financing activitiesborrowing and repaying the principal amount borrowed &

all cash transactions with shareholders

8/13/2019 Cash Flow-s

4/12

4

THE CASH FLOW STATEMENTSuppose you saw the following under ASSETS

on a companys balance sheet: (in $ 000)2012 2011

Land 10,000 4,000

and under LIABILITIES there were noliabilities for a land purchase.

8/13/2019 Cash Flow-s

5/12

5

THE CASH FLOW STATEMENTSuppose you saw the following under ASSETS

on a companys balance sheet: (in $ 000)

2012 2011Land 10,000 4,000

and under LIABILITIES there was:

2012 2011

Mortgage payable for land 5,000 -0-

8/13/2019 Cash Flow-s

6/12

6

THE CASH FLOW STATEMENT

Suppose you saw the following under ASSETSon a companys balance sheet: (in $ 000)

2012 2011Land 10,000 24,000

And on the 2012 financial statements therewas no mention of a land impairment loss.

8/13/2019 Cash Flow-s

7/12

7

THE CASH FLOW STATEMENTSuppose you saw the following under ASSETS

on a companys balance sheet: (in $ 000)

2012 2011Land 10,000 24,000Nothing about a receivable from sale of land.

And on the 2012 income statement you sawGain on land sale 5,000

8/13/2019 Cash Flow-s

8/12

8

THE CASH FLOW STATEMENTSuppose you saw the following under ASSETS

on a companys balance sheet: (in $ 000)

2012 2011Land 10,000 24,000

Mortgage receivable-land 8,000 0

And on the 2012 income statement you sawGain on land sale 5,000

8/13/2019 Cash Flow-s

9/12

9

THE CASH FLOW STATEMENTSuppose you saw the following under ASSETS

on a companys balance sheet: (in $ 000)

2012 2011Land 10,000 24,000

And on the 2012 income statement you sawLand impairment loss 14,000

8/13/2019 Cash Flow-s

10/12

10

THE CASH FLOW STATEMENT

Suppose you saw the following under OWNERSEQUITY on a companys balance sheet: (in $ 000)

2012 2011Capital stock 10,000 7,000

Additional paid in capital 14,000 9,000

8/13/2019 Cash Flow-s

11/12

11

THE CASH FLOW STATEMENT

For the most part, that is theapproach companies take toprepare the

Investing Activitiesand the

Financial Activities parts oftheir cash flow statements -they compare balances on thebalance sheet.

8/13/2019 Cash Flow-s

12/12

12

THE CASH FLOW STATEMENT

But for Operating Activities,which is based, in part, on the

income statement, companieshave a choice:

the direct methodor

the indirect method,both give you the same answer,using different approaches.