Component of Cash Flow Statement Financing Activities
Cash flows which are arising from taxes on Financing should be separately disclosed. They shall be classified as cash flows from operating activities unless specifically it is identified with financing and investing activities.
Cash flow on Financing Activities in on income can be arisen on those transactions that give rise to cash flows which have been classified in a statement of cash flows as operating, investing or financing activities.
While a tax expenses that might be mainly readily identifiable basically with the investment or a financing activities which are mainly related to the tax, cash flows are often it is impracticable for identifying.
This may arise in a different period from the cash flows of the transaction is underlying the transaction. Therefore, taxes are paid, which are usually classified as cash flows from operating activities.
However, when it is practically to identify the tax cash flow with an individual transaction that gives rise to cash flows classified as investing or financing activities, it is classified as it is an investing or a financing activity as appropriate.
VARIOUS INVESTMENTS IN ASSOCIATES, SUBSIDIARIES AND JOINT VENTURES
While an investment is accounted for an associate, a the joint venture, or a subsidiary can be accounted for or by the use of the equity or cost method, an investor can limits its reporting in the statement of cash flows for the cash flows between the investee and itself refer ICAI.
For example, to dividends and advances. An entity that is reporting its interest in an associate or a joint venture by using the equity method which is included in its statement of cash flows in the respect of its investments in the joint venture or associate, and distributions and making other payments or receipts between the associates and the joint venture.
VARIOUS CHANGES IN OWNERSHIP Cash Flow Statement Financing Activities
Classification of Cash Flows as Investing Activity:
- The aggregate cash flows which is arising from the obtaining or losing control of other businesses or subsidiaries shall be presented in financials reporting separately and classified as investing activities.
- An entity should disclose, in aggregate, in the respect of both obtaining and losing control of subsidiaries and other businesses during the period each of the following-
(a) The total consideration which is paid or even received.
(b) The portion of the consideration which is consisting of cash and cash equivalents.
(c) The sum of cash and cash equivalents in other businesses or the subsidiaries over which control can be obtained or lost.
(d) The value of the assets and liabilities other than cash or cash equivalents in the subsidiaries or other businesses over which control can be obtained or lost, summarized by each major category.
- The unrelated presentation of the cash flow can effects the obtaining or losing control of other businesses or subsidiaries as single line items, together with the unrelated disclosure of the value of assets and liabilities which are acquired or disposed of in Cash Flow Statement Financing Activities. It also helps to distinguish that cash flows from the cash flows which are arising from the other financing, operating and investing activities. The cash flow can effects in losing control are not deducted from those of obtaining control.
- The total amount of the cash received or paid as consideration for obtaining or losing control on subsidiaries or other businesses can be reported in the statement of cash flows net of cash and cash equivalents which are acquired or disposed of as the part of such transactions events or changes in circumstances.
Classification of Cash Flow Statement Financing Activities:
- Cash flows which are arising from changes in ownership interests in a subsidiary that is not resulting in a loss of control should be classified as cash flows from various financing activities unless the subsidiary can be holded by an investment entity and is required to be measured at fair value through profit or loss.
- Changes in the interests of ownership in a subsidiary that is not resulting in a loss of control, such as the following purchase or sale by subsidiary’s equity instruments, are accounted for as equity transactions unless the subsidiary can be holded by an investment entity and is further required for measuring at fair value through profit or loss. These are mention in MCA Site. Accordingly, to the resulting cash flows are classified in the same way as other transactions with owners.
- Financial and investing transactions that are not required for the use of cash or cash equivalents should be not taken in the statement of cash flows.
- Elsewhere, such transactions should be disclosed in the financial statements in the way that is providing all the relevant information about these investments and financing activities.
- Many type of investing and a financing activities which are basically not a directly impacting into a current cash flows, although they do are consider as affecting a capital and a assets structure of an company or organization. Such a non-cash items will not be form as a part of the mention cash flow statement.
Various examples of non-cash transactions:
(a) The acquisition of assets which are either by assuming directly can be related to the liabilities or utilizing a lease.
(b) The acquisition of an entity utilizing an equity issue.
(c) The conversion of debt to equity.
Changes in liabilities which are arising from Cash Flow Statement Financing Activities
- An entity should be provide as a disclosures that will be enabling users of any of financial statements that to evaluate the changes in liabilities which are arising from financing activities, including changes arising from cash flows and non-cash changes.
- To the extent necessary for satisfying the above requirement, an entity shall disclose the following changes in liabilities arising from financing activities-
(a) Substitutes from financing cash flows.
(b) Substitutes arising from obtaining or losing the control of subsidiaries or several other businesses.
(c) The result of changes in foreign exchange rates.
(d) Changes in fair values.
(e) Other changes.
- Liabilities which are arising from financing activities are those liabilities for which cash flows were, or future cash flows can be classified in the statement of cash flows as cash flows from various financing activities.
- In addition, the disclosure is required for applying changes in financial assets, if financial assets of those cash flows were, or future cash flows can be included in cash flows from financing activities.
- One way for fulfilling the disclosure which is required by reconciling the opening and closing balances in the balance sheet for liabilities arising from financing activities, including the changes identified.
- If an entity is providing the disclosure which is required in the combination with the disclosure of changes in other liabilities and assets, it should disclose the changes in liabilities that are basically arising a separately from a financing activities or from any changes in those of the other assets and a liabilities.
VARIOUS CASH AND CASH EQUIVALENTS Cash Flow Statement Financing Activities
- Cash and cash equivalents are the components that should be disclosed by an entity. It shall present a reconciliation of the amounts in its statement of cash flows with the equivalent items reported in the balance sheet.
- Company will provide a policy that it adopts in determining the composition of cash and cash equivalents.
VARIOUS OTHER DISCLOSURES
An entity that should be disclose, a together with mainly a commentary by the particular management. The amount of a cash and a cash equivalent for a balances which are mainly significantly for held by a entity that are not mainly available for a use by group.
There are several circumstances in which cash and cash equivalent balances are held by an entity and are not available for the use by the group.
Examples include cash and cash equivalent balances which are held by a subsidiary that is operating in a country where other legal restrictions or exchange controls are applied when the balances are not available for general use by the other parent subsidiaries.
Additional information might be relevant for the users for understanding the financial position and liquidity of an entity. It may include in Cash Flow Statement Financing Activities.
- The number of borrowing facilities which are undrawn that might be available for various future operating activities and for settling capital commitments, indicating any restrictions on using these facilities.
- The aggregate amount of cash flows that are representing increases in operating capacity, which are separated from those cash flows that are required for maintaining operating capacity, will help the stakeholders to know whether an entity is paying proper attention to maintenance also.
- The number of cash flows arising from each reportable segment’s operating, investing, and financing activities. It will provide an idea about the company as a whole and the various parts of the company and their efficiencies.
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