2  Discuss: The importance of Cash  Economic and Financial Crisis  Cash Flow Statement and its purpose  Understand the differences: FASB and IFRS  Prepare comprehensive Cash Flow Statement  (Comprehensive Illustration)  Prepare the presentation & disclosures.

the survival, growth and profitability of the business STRATEGIC DECISION Assess the financial health of a business  Investors  Shareholders  Creditors  Employees  Managers/owners: warning signs 3

 Define Cash (Cash and Cash Equivalent)  Highly liquid, Short-Term investments (money market funds), Treasury bills, commercial paper

5 PRIMARY ELEMENTS OF THE CASH FLOWS Reports: cash inflows and outflows INVESTING ACTIVITIES long-term assets investment FINANCING ACTIVITIES OPERATING ACTIVITIES core of the business = NET INCREASE (DECREASE) IN CASH long-term debt and equity

6  FASB 95  Interest payments (operating )  Interest/dividends received (operating)  Dividends paid (financing )  IAS 7  IAS 7 Classification of Cash Flow same except:  Research……  DIFFERENCES: Classification

7  FASB Identifies two methods: The indirect method derives cash flows from accrual basis statements. (also called reconciliation method) The direct method determines cash flows directly for each source or use of cash. Difference…. OPERATING ACTIVITIES ONLY

Preparing Comprehensive Cash Flow Statement Illustration…  Additional consideration:  Bonds payable  Discount/premium on bonds payable  Convertible bonds  Retirement of bonds  Stock: Preferred/common  Convertible preferred  Treasury Stock  Dividends  Cash/stock dividends  Deferred Tax  Lease  Pension  Investment: using equity method 8