![]() However, as there are no such cash flow classifications under FRS 102, such cash flows will be classed as operating activities. Under FRS 1 such cash flows would have been presented under returns on investment and servicing of finance and taxation respectively. The operating activities classification is the ‘default’ classification and hence any cash flows which are not investing or financing cash flows will be operating cash flows.Ī common scenario which presents itself to entities reporting under FRS 102 for the first time is where to classify interest income/expense and taxation cash flows. Operating activities are the day-to-day revenue-producing activities of the entity. Under FRS 102, there are only three types of cash flow classification: Capital expenditure and financial investments.Returns on investments and servicing of finance.Dividends from joint ventures and associates.FRS 1 contained nine different cash flow classifications as follows: Classification of cash flowsĪ notable difference between FRS 1 and FRS 102 is the number of cash flow classifications. Medium-sized and large companies reporting under FRS 102 must prepare a cash flow statement as part of their general purpose FRS 102 financial statements. ![]() Where the entity voluntarily chooses to prepare a cash flow statement, it must apply the provisions in Section 7. Section 7 also recognises the concept of ‘cash equivalents’ which are short-term, highly liquid investments which the entity can convert into known amounts of cash and which must also be subject to an insignificant risk of change in value.Įntities that are classified as small under the Companies Act 2006 do not have to prepare a cash flow statement as part of their statutory financial statements however, that does not mean to say that they are precluded from preparing such a statement, if the directors so wish. The purpose of the cash flow statement is to enable users of an entity’s financial statements to understand how the entity has generated cash and what it has done with that cash. Preparers of financial statements under FRS 102 can expect the presentation of an FRS 102-style cash flow statement to be markedly different than the cash flow statement prepared under FRS 1 Cash flow statements (revised 1996). FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland deals with the preparation and presentation of the cash flow statement in Section 7 Statement of Cash Flows. ![]()
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