ECSAFA GUIDANCE ON FINANCIAL REPORTING FOR …icancpd.net/ftp/public/circulars/Circulars 2006/NAC001 Financial... · Namibian Statement of Generally Accepted Accounting Practice

Namibian Statement of Generally Accepted Accounting Practice NAC 001

Issued September 2006 Page 1 of 1

ECSAFA GUIDANCE ON

FINANCIAL REPORTING FOR SMALL AND MEDIUM

SIZED ENTITIES

THE EASTERN, CENTRAL AND SOUTHERN AFRICAN FEDERATION OF ACCOUNTANTS

Every effort is made to ensure that the advice given in the Guide is correct. Nevertheless that advice is given purely as guidance to members of ECSAFA to assist them with particular problems relating to the subject matter of the Guide and ECSAFA will have no responsibility to any person for any claim of any nature whatsoever that may arise out of or relate to the contents of the Guide.

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Acknowledgement

The International Accounting Standards Board (IASB) has issued a comprehensive body of International Financial Reporting Standards (IFRSs), which has been used to prepare this ECSAFA Guidance on Financial Reporting for Small and Medium Sized Entities. This Guide is drawn primarily from the IASB Framework for the Preparation and Presentation of Financial Statements, IAS 7 – Cash Flow Statements and certain principles set out in IAS 1 – Presentation of Financial Statements and IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors.

Extracts of IFRSs (referred to above) are either reproduced or referenced to in this guidance with the permission of the IASB.

The approved text of the IFRSs is published by the IASB in the English language. The IFRSs are contained in the IASB Handbook of International Financial Reporting Standards and are available from:

The International Accounting Standards Board

30 Cannon Street London EC4M6XH

United Kingdom Publication email: [email protected]

Internet: http://www.iasb.org

Copyright on IFRSs, exposure drafts and other publications of the IASB are vested in the IASB and terms and conditions attached should be observed.

The Eastern, Central and Southern African Federation of Accountants PO Box 42423 00100 Nairobi, Kenya


mailto:[email protected]

http://www.iasb.org




Table of Contents

Paragraphs

Preface Introduction The need for guidance for small and medium sized entities 01 – 04 Objective of the Guide 05 Scope Authority of the Guide 06 – 07 Description of an SME 08 – 09 Financial Reporting Principles for SMEs 10 Framework for the Preparation of Financial Statements for SMEs 11 Elements of Financial Statements Definition of elements of financial statements 12 – 13 Recognition of elements of financial statements 14 – 15 Derecognition of elements of financial statements 16 – 17 Measurement of elements of financial statements 18 – 20 Selection and application of accounting policies 21 – 24 Offsetting 25 Components of Financial Statements Presentation of financial statements 26 Balance sheet 27 – 32 Income statement 33 – 38 Statement of changes in equity 39 – 40 Cash flow statement 41 Notes to financial statements 42 – 44 Consolidated financial statements 45 Transitional provisions 46 – 47 Appendix 1 Illustrative financial statement structure





PREFACE The Eastern, Central and Southern African Federation of Accountants (ECSAFA) has developed this Guide primarily to assist small and medium sized entities (SMEs) that are required to prepare financial statements in those countries that have adopted International Financial Reporting Standards (IFRSs) and which would not necessarily be required to comply with any of the International Accounting Standards Board (IASB) reporting frameworks i.e. full IFRS or IFRS for SMEs to be issued in future. The Guide endeavours to assist in reducing financial reporting complexities for SMEs not required to apply IFRS for SMEs, when issued by the IASB by proposing that such SMEs apply only the IASB Framework for the Preparation and Presentation of Financial Statements, IAS 7 – Cash Flow Statements and certain principles set out in IAS 1 – Presentation of Financial Statement, and IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors. The Guide should be used in conjunction with reference to these standards. This Guide will only have authority when adopted and issued by the institution or regulator in every jurisdiction that is responsible of issuing accounting standards in that jurisdiction (referred to as “standard-setter” in the Guide). Compliance with the Guide will not result in compliance with IFRSs. As stated in paragraph 14 of IAS 1, an entity whose financial statements comply with IFRSs shall make an explicit and unreserved statement of such compliance in the notes. Financial statements shall not be described as complying with IFRSs unless they comply with all requirements of IFRSs. Therefore, should an SME comply with the Guide, such an SME would not be able to state compliance with IFRSs. ECSAFA has no authority to set accounting standards or to issue mandatory financial reporting guidance within the region. ECSAFA encourages each standard-setter in the region to use the Guide as a framework to be used by SMEs, not required to apply the IASB frameworks, as defined in the jurisdiction. ECSAFA encourages that the Guide be issued as a standard. It is proposed that ECSAFA member bodies in the various countries and reporting jurisdictions use their best endeavours to encourage the necessary regulatory and other changes to ease the reporting burden of SMEs within the various jurisdictions. Furthermore, each standard-setter should consider the use of the Guide by SMEs that will be required to comply with IFRS for SMEs as an interim measure until such time as the IASB issues such standards





INTRODUCTION The need for guidance for small and medium sized entities

01 Standard-setters in most jurisdictions in the ECSAFA region have already adopted IFRSs issued by the IASB. In many instances, this is the only set of accounting standards to be applied by preparers of financial statements in their respective countries.

02 IFRSs are intended for general purpose financial statements that are intended to

meet the needs of users not in a position to demand reports tailored to meet their particular information requirements. Therefore, IFRSs are best suited for entities of which the shares are publicly traded or fairly widely held.

03 IFRSs are intended for public interest companies and, are therefore, not necessarily

ideal for owner-managed businesses or entities of which the shares are closely held. Such businesses are generally referred to as small and medium sized entities for the purpose of the Guide. The definition of such entities varies for different jurisdictions and an attempt is made to describe such entities in the Scope section below.

04 The IASB has recognised the limitation of IFRSs for SMEs and has therefore

embarked on a project to develop accounting standards appropriate for SMEs. The IFRSs for SMEs are aimed at general purpose financial reporting to outside resource providers and not to provide information for owner-managers or tax authorities. Therefore, the standards are not intended for application by all SMEs. The IASB project commenced in 2003 and the estimated date for issue of the SME standards is 2007 at the earliest.

Objective of the Guide 05 The Guide provides a framework for preparing financial statements by SMEs that

will not be required to comply with or fit into the category intended by the IASB SMEs standards. In addition, standard-setters in ECSAFA region may also consider using it as an interim measure for SMEs that will be required to comply with IFRS for SMEs, until such time as the IASB has completed its project of developing SME standards. SCOPE Authority of the Guide

06 ECSAFA is not a standard-setter and therefore does not have the authority to require compliance with any standard, regulation, guide or legislation. A standard-setter within the various jurisdictions will have to define an SME and consider the appropriateness of the Guide to determine which SMEs as defined in such jurisdiction should be allowed to comply with the Guide, which should be issued as a standard in the various jurisdictions.





07 As stated in paragraph 14 of IAS 1, an entity whose financial statements comply with IFRSs shall make an explicit and unreserved statement of such compliance in the notes to the financial statements. Financial statements shall not be described as complying with IFRSs unless they comply with all requirements of IFRSs. Therefore, should an SME comply with the Guide, such an SME would not be able to state compliance with IFRSs. Compliance with the Guide will not necessarily result in comparability of financial statements of various SMEs. Description of an SME

08 To assist the standard-setters within the various jurisdictions to define an SME as required in paragraph .06, the Guide attempts to give broad guidance on entities most likely to be SMEs In broad terms, these are entities that are not publicly accountable nor considered as representing public interest.

09 A publicly accountable entity or an entity that represents public interest may be

described as having certain of the following characteristics:

• An entity that takes deposits or loans from the public.

• An entity that offers its shares to the public.

• An entity that has essential public responsibility or provides essential public service.

• An entity that holds assets in a fiduciary capacity for a broad group of outsiders, such as a bank, insurance company, securities broker/dealer, pension fund, mutual fund or investment banking entity.

• An entity that is economically significant in its country on the basis of criteria such as total assets, total income, number of employees, degree of market dominance, and nature and extent of external borrowings.

• An entity who is not owner-managed and whose shares are not closely held.

FINANCIAL REPORTING PRINCIPLES FOR SMEs

10 The Guide requires, at a minimum, that SMEs apply the IASB Framework for the Preparation and Presentation of Financial Statements (IASB Framework), IAS 7 – Cash Flow Statements, and certain principles (highlighted in various sections in the Guide), set out in IAS 1 – Presentation of Financial Statements, and IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors. The Guide sets out specific principles regarding recognition, measurement and minimum disclosure and presentation requirements of financial statements drawn from the noted IFRSs. The principles are further explained in the various paragraphs of the Guide and highlighted to users of the Guide by using bold type. FRAMEWORK FOR THE PREPARATION OF FINANCIAL STATEMENTS OF SMEs

11 The Guide requires that SMEs apply the underlying assumptions, qualitative characteristics, constraints on relevant and reliable information and true and fair view/ fair presentation, as set out in the IASB Framework, unless stated differently elsewhere in the Guide.





ELEMENTS OF FINANCIAL STATEMENTS Definition of elements of financial statements

12 The Guide requires that elements and definitions for such elements, as set out in the IASB Framework, be used for SMEs.

13 These elements include:

• assets,

• liability,

• equity,

• income, and

• expenses. Recognition of elements of financial statements 14 The Guide requires application of the recognition principles set out in the

IASB Framework, except in instances noted in paragraph 15. 15 The Guide recognises that instances will occur when the measurement of

certain elements of financial statements and recognition thereof would be impracticable for SMEs, e.g where the cost of measuring such an element would outweigh the benefit of recognising the element. In such an instance, such an element need not be recognised, but the fact and reason should be disclosed in the financial statements.

Derecognition of elements of financial statements

16 If an asset or liability previously recognised no longer meets the recognition criteria (as stated in the IASB Framework) for such an element, the asset or liability should be derecognised.

17 The gain or loss arising from derecognition of an asset shall be recognised in

the income statement. The difference between the carrying amount of the liability extinguished or transferred to another party and the consideration paid shall be recognised in the income statement.

Measurement of elements of financial statements 18 The Guide recommends the use of historical cost as a measurement basis to be

adopted by SMEs in preparing financial statements. SMEs may use an alternative basis, if the results would be more relevant and reliable, provided adequate disclosure is made of the measurement basis used.

19. The Guide requires property plant and equipment, investment property

(carried at cost), intangible assets and biological assets (carried at cost) to be depreciated/amortised and impairment recognised in line with policies to be determined by management in reference to requirements in paragraph .22 below.

20 Some of the measurement basis including those identified in IASB Framework and

various IFRSs includes the following:





(a) Historical cost. Assets are recorded at the amount of cash or cash equivalents paid or the fair value of the consideration given to acquire them at the time of their acquisition. Liabilities are recorded at the amount of proceeds received in exchange for the obligation, or in some circumstances (for example, income taxes), at the amounts of cash or cash equivalents expected to be paid to satisfy the liability in the normal course of business.

(b) Current cost. Assets are carried at the amount of cash or cash equivalents that would have to be paid if the same or an equivalent asset was acquired currently. Liabilities are carried at the undiscounted amount of cash or cash equivalents that would be required to settle the obligation currently.

(c) Realisable (settlement) value. Assets are carried at the amount of cash or cash equivalents that could currently be obtained by selling the asset in an orderly disposal. Liabilities are carried at their settlement values; that is, the undiscounted amounts of cash or cash equivalents expected to be paid to satisfy the liabilities in the normal course of business.

(d) Present value. Assets are carried at the present discounted value of the future net cash inflows that the item is expected to generate in the normal course of business. Liabilities are carried at the present discounted value of the future net cash outflows that are expected to be required to settle the liabilities in the normal course of business.

(e) Fair value. The amount for which an asset would be exchanged or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.

Selection and application of accounting policies

21 The Guide requires that management should apply the principles in the Guide to determine the accounting policy or policies to be applied to transactions entered into by the SME.

22 In instances where principles in the Guide are not considered sufficient to

specific transactions, management should use its judgment in developing and applying an accounting policy. In making the judgment, the Guide recommends that management refer and consider the applicability of the following sources, in descending order:

(a) The requirements and guidance in Standards and Interpretations issued by IASB.

(b) Most recent pronouncements of other standard-setting bodies that use a conceptual framework similar to the IASB Framework to develop accounting standards.

(c) Accepted industry practice. 23 The Guide requires the accounting policies selected to be applied consistently

for similar transactions, events and conditions. Changes in accounting policy and accounting estimates therefore must be undertaken in terms of the requirements in IAS 8.

24 The principles with regard to changes in accounting estimates and errors, set

out in IAS 8, must be applied by SMEs applying the Guide.





Offsetting 25 The Guide requires that assets and liabilities should not be offset except when,

and only when, an entity currently has a legally enforceable right to set off the recognised amounts; and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. It also requires that items of revenue and expense should not be offset except when the gains, losses and related expenses arising from the same or similar transactions and other events are not material: in such an instance the amounts could be aggregated.

COMPONENTS OF FINANCIAL STATEMENTS Presentation of financial statements

26 As specified in IAS 1 – Presentation of Financial Statements, a complete set of financial statements must comprise:

(a) a balance sheet;

(b) an income statement;

(c) a statement of changes in equity showing either:

(i) all changes in equity, or

(ii) changes in equity other than those arising from transactions with equity holders acting in their capacity as equity holders;

(d) a cash flow statement; and

(e) notes, comprising a summary of significant accounting policies and other explanatory notes.

Balance Sheet

Information to be presented on the face of the balance sheet 27 At a minimum, taking into account the provision in paragraph 15, the face of

the balance sheet shall include line items that present the following amounts:

(a) Property, plant and equipment.

(b) Investment property.

(c) Intangible assets.

(d) Financial assets (excluding amounts shown under (e), (h) and (i)).

(e) Investments.

(f) Biological assets.

(g) Inventories.

(h) Trade and other receivables.

(i) Cash and cash equivalents.

(j) Trade and other payables.

(k) Provisions.

(l) Financial liabilities (excluding amounts shown under (j) and (k)).





(m) Liabilities and assets for current tax.

(n) Deferred tax liabilities and deferred tax assets.

(o) Issued capital and reserves. 28 Additional line items, headings and sub-totals shall be presented on the face of the

balance sheet when such presentation is relevant to an understanding of the SME’s financial position.

29 An SME shall disclose, either on the face of the balance sheet or in the notes,

further sub-classifications of the line items presented, classified in a manner appropriate to the SME’s operations.

30 The Guide requires assets and liabilities to be presented as separate

classifications of current and non-current on the face of financial statements in line with the requirements in paragraphs .51 to .56 of IAS 1.

Equity

31 The following shall be disclosed, either on the face of the balance sheet or in the notes:

(a) For each class of share capital:

(i) the number of shares authorised;

(ii) the number of shares issued and fully paid, and issued but not fully paid;

(iii) par value per share, or that the shares have no par value;

(iv) a reconciliation of the number of shares outstanding at the beginning and at the end of the period;

(v) the rights, preferences and restrictions attaching to that class including restrictions on the distribution of dividends and the repayment of capital;

(vi) shares in the SME held by the SME or by its subsidiaries or associates; and

(vii) shares reserved for issue under options and contracts for the sale of shares, including the terms and amounts.

(b) A description of the nature and purpose of each reserve within equity. 32 An SME without share capital, such as a partnership or trust, shall disclose

information equivalent to that required by 31(a) above, showing changes during the period in each category of equity interest, and the rights, preferences and restrictions attaching to each category of equity interest.

Income Statement

Information to be presented on the face of the income statement 33 At a minimum, taking into account provision in paragraph 15, the face of the

income statement shall include line items that present the following amounts for the period:

(a) Revenue.

(b) Finance costs.





(c) Tax expense.

(d) Profit or loss.

34 Additional line items, headings and sub-totals shall be presented on the face of the income statement when such presentation is relevant to an understanding of the SME’s financial performance.

35 When items of income and expense are material, their nature and amount shall be

disclosed separately on the face of income statement.

Nature or function 36 An SME can present an analysis of expenses using a classification based on either

the nature of expenses or their function within the SME, whichever provides information that is reliable and more relevant. The Guide has no preference with regard to the classification used.

37 The choice between the function of expense method and the nature of expense

method depends on historical and industry factors and the nature of the SME. Both methods provide an indication of those costs that might vary, directly or indirectly, with the level of sales or production of the SME. Because each method of presentation has merit for different types of entities, this Guide requires management to select the most relevant and reliable presentation. However, because information on the nature of expenses is useful in predicting future cash flows, additional disclosure is required when the function of expense classification is used.

Dividends 38 The Guide requires disclosure, either on the face of the income statement or

the statement of changes in equity, or in the notes, the amount of dividends recognised as distributions to equity holders during the period, and the related amount per share.

Statement of changes in equity 39 At a minimum, the face of the statement of changes in equity shall include line

items that present the following amounts:

(a) Profit or loss for the period.

(b) Each item of income and expense for the period that, as required by an accounting policy selected by management, is recognised directly in equity, and the total of these items.

(c) For each component of equity, the effects of changes in accounting policies and corrections of errors recognised in accordance with IAS 8.

40 The following shall be disclosed, either on the face of the statement of changes

in equity or in the notes:

(a) The amounts of transactions with equity holders acting in their capacity as equity holders, showing separately distributions to equity holders.

(b) The balance of retained earnings (i.e. accumulated profit or loss) at the beginning of the period and at the balance sheet date, and the changes during the period.





(c) A reconciliation between the carrying amount of each class of contributed equity and each reserve at the beginning and the end of the period, separately disclosing each change.

Cash flow statement 41 The Guide requires a cash flow statement, as cash flow information provides

users of financial statements with a basis to assess the ability of the SME to generate cash and cash equivalents, and the needs of the SME to utilise those cash flows. IAS 7 – Cash Flow Statements, sets out requirements for the presentation of the cash flow statement and related disclosures.

Notes to the financial statements 42 The following shall be disclosed in the summary of significant accounting

policies:

(a) The measurement basis (or bases) used in preparing the financial statements.

(b) The other accounting policies used that are relevant to an understanding of the financial statements.

43 It is important for users to be informed of the measurement basis or bases used in

the financial statements (for example, historical cost, current cost, net realisable value, fair value or recoverable amount) because the basis on which the financial statements are prepared significantly affects their analysis. When more than one measurement bases are used in the financial statements, for example when particular classes of assets are revalued, it is sufficient to provide an indication of the categories of assets and liabilities to which each measurement basis is applied.

44 The Guide requires disclosure of notes containing additional information or

analysis that supports amounts presented on the face of the balance sheet, income statement, statement of changes in equity or cash flow statement. Such information would be necessary for proper understanding of the financial statements. Notes to the financial statements should be presented in a systematic manner and be cross-referenced to any related information on the face of the balance sheet, income statement, statement of changes in equity or cash flow statement.

Consolidated financial statements

45 The Guide does not require preparation of consolidated financial statements. However, the names and shareholdings of subsidiaries, investments in associates and joint ventures should be disclosed.

Transitional Provisions

46 The Guide has not stipulated effective date as this should be determined by every standard-setter that adopts the Guide in its jurisdiction as a standard. ECSAFA recommends that the standard should be applicable for financial periods commencing on or after 1 January 2007.

47. However, the Guide recommends that an SME should prospectively apply all the provisions in the Guide from the effective date stipulated by the standard-setter i.e the SME will report the effect of adopting the Guide as an adjustment to the





opening accumulated profits/(losses) for the period in which the Guide is first adopted. Comparative information would not be adjusted.





APPENDIX I Illustrative financial statement structure

XYZ - BALANCE SHEET AS AT 31 DECEMBER 20-6

(in thousands of currency units)

20-6 20-5

ASSETS Non-current assets Property, plant and equipment X X Goodwill X X Investment property X X Investments X X Other intangible assets X X Biological assets X X

X X

Current assets Inventories X X Trade receivables X X Other current assets X X Cash and cash equivalents X X

X X

Total assets X X





XYZ - BALANCE SHEET AS AT 31 DECEMBER 20-6 (in thousands of currency units)

20-6 20-5 EQUITY AND LIABILITIES

Equity

Share capital X X

Other reserves X X

Retained earnings X X

Total equity X X

Non-current liabilities

Long-term borrowings X X

Long-term provisions X X

Total non-current liabilities X X

Current liabilities

Trade and other payables X X

Short-term borrowings X X

Current portion of long-term borrowings X X

Current tax payable X X

Short-term provisions X X

Total current liabilities X X

Total liabilities X X

Total equity and liabilities X X





XYZ - INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 20-6

(illustrating the classification of expenses by function)


20-6 20-5

Revenue X X

Cost of sales (X) (X)

Gross profit X X

Other income X X

Distribution costs (X) (X)

Administrative expenses (X) (X)

Other expenses (X) (X)

Finance costs (X) (X)

Profit before tax X X

Income tax expense (X) (X)

Profit for the period X X





XYZ – INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 20-6 (illustrating the classification of expenses by nature) (in thousands of currency units) 20-6 20-5

Revenue

Other income

Changes in inventories of finished goods and work in progress

Work performed by the entity and capitalised

Raw material and consumables used

Employee benefits expense

Depreciation and amortisation expense

Impairment of property, plant and equipment

Other expenses

Finance costs

X

X

(X)

X

(X)

(X)

(X)

(X)

(X)

(X)

X

X

X

X

(X)

(X)

(X)

(X)

(X)

(X)

Profit before tax

Income tax expense

X

(X)

X

(X)

Profit for the period X X





XYZ - STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 20-6


Share capital

Other reserves*

Retained earnings

Total equity

Balance at 31 December 20-4 X X X X Changes in accounting policy (X) (X) Restated balance X X X X Changes in equity for 20-5 Gain on property revaluation X X Tax on items taken directly to or transferred from equity (X) (X) Net income recognised directly in equity X X Profit for the period X X Total recognised income and expense for the period X X X Dividends (X) (X) Issue of share capital X X Balance at 31 December 20-5 X X X X Changes in equity for 20-6 Loss on property revaluation (X) (X) Tax on items taken directly to or transferred from equity (X) (X) Net income recognised directly in equity X X Profit for the period X X Total recognised income and expense for the period X X X Dividends (X) (X) Issue of share capital X X Balance at 31 December 20-6 X X X X *Other reserves are analysed into their components, if material.





XYZ – CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 20-6

DIRECT METHOD CASH FLOW STATEMENT

(in thousands of currency units) 20-6 20-5 Cash flows from operating activities Cash receipts from customers X X Cash paid to suppliers and employees (X) (X) Cash generated from operations X X Interest paid (X) (X) Income taxes paid (X) (X)

Net cash from operating activities X X

Cash flows from investing activities Acquisition of subsidiary (X) (X) Purchase of property, plant and equipment (Note A) (X) (X)

Proceeds from sale of equipment X X Interest received X X Dividends received X X

Net cash used in investing activities (X) (X)

Cash flows from financing activities Proceeds from issue of share capital X X Proceeds from long-term borrowings X X Payment of finance lease liabilities (X) (X) Dividends paid(a) (X) (X)


Net increase in cash and cash equivalents X X

Cash and cash equivalents at beginning of period (Note B) X X Cash and cash equivalents at end of X X

period (Note B) (a) This could also be shown as an operating cash flow.





XYZ – CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 20-6 INDIRECT METHOD CASH FLOW STATEMENT (in thousands of currency units) 20-6 20-5 Cash flows from operating activities Profit before taxation X X Adjustments for: Depreciation X X Foreign exchange loss X X Investment income (X) (X) Interest expense X X X X Increase in trade and other receivables (X) (X) Decrease in inventories X X Decrease in trade payables (X) (X) Cash generated from operations X X Interest paid (X) (X) Income taxes paid (X) (X)

Net cash from operating activities X X

Cash flows from investing activities Acquisition of subsidiary (X) (X) Purchase of property, plant and equipment (Note A) (X) (X)

Proceeds from sale of equipment X X Interest received X X Dividends received X X


Cash flows from financing activities Proceeds from issue of share capital X X Proceeds from long-term borrowings X X Payment of finance lease liabilities (X) (X) Dividends paid(a) (X) (X)

Net cash used in financing activities (X) (X)

Net increase in cash and cash equivalents X X

Cash and cash equivalents at beginning of period (Note B) X X

Cash and cash equivalents at end of X X

period (Note B)





(a) This could also be shown as an operating cash flows

XYZ – CASH FLOW STATEMENT NOTES TO THE CASH FLOW STATEMENT (DIRECT METHOD AND INDIRECT METHOD)

A. Property, Plant and Equipment During the period, the Company acquired property, plant and equipment with an

aggregate cost of (20-5: XX) of which XX (20-5: XX) was acquired by means of finance leases. Cash payments of XX were made to purchase property, plant and equipment.

B. Cash and Cash Equivalents Cash and cash equivalents consist of cash on hand and balances with banks, and

investments in money market instruments. Cash and cash equivalents included in the cash flow statement comprise the following balance sheet amounts:

20-6 20-5 Cash on hand and balances with

banks X X

Short-term investments X X Cash and cash equivalents as

previously reported

X

X Effect of exchange rate changes X X

Cash and cash equivalents as restated

X X

The Company has undrawn borrowing facilities of XX of which XX may be used only for future expansion. Alternative presentation (indirect method) As an alternative, in an indirect method cash flow statement, operating profit before working capital changes is sometimes presented as follows: 20-6 Revenues excluding investment income

X

Operating expense excluding depreciation

(X)

Operating profit before working X capital changes #122609



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