IFRS PRACTICAL IMPLEMENTATION GUIDE AND WORKBOOK

Wiley IFRS: Practical Impl ementation Guide and Workbook

42

when cash inflows from the proceeds of the loans and cash outflows from repayment of the loans are disclosed separately, users of financial statements will get a better understanding of the financ– ing activities of the entity . lAS 7 specifies two exceptions in cases of entities other than financial institutions where netting of cash flows is permitted. ( I) Items with quick turnovers, large amounts, and short maturiti es may be presented as net cash flows. (2) Cash recei pts and payments on behalf of customers reflect the activities of the customers rather than those of the entities. The flows may also be reported on a net rather than a gross basis. 13. FOREIGN CURRENCY CASH FLOWS (I) Cash flows arisi ng from transactions in a foreig n currency shall be recorded in an entity's functional currency by using the rate of exchange between the functional currency and the foreign currency on the date of the cash flow; and (2) Foreign subsidiaries must prepare separate cash flow statements and translate the state- ments to the functional currency at the exchange rate prevailing on the date of cash flow. 14. REPORTING FUTURES, FORWARD CONTRACTS, OPTIONS, AND SWAPS 14.1 lAS 7 recognizes that cash flows from futures contracts, forward contracts, option contract s, and swap contracts are normally classified as investing activities, except ( I) When such contracts are held for dealing or trading purposes and thus represent operating activities; or (2) When the payments or receipts are considered by the entities as financing activities and are reported accord ingly. 14.2 When a contract is accounted for as a hedge of an identifiable position, the cash flows of the contract are classified in the same manner as the cash flows of the position being hedged. 15. RECONCILIATION OF CASH AND CASH EQUIVALENTS lAS 7 makes it incumbent upon an entity to disclose the components of cash and cash equi valents and also to present a reconciliation of the difference, if any, between the amounts report ed in the statement of cash flows and equivalent items reported in the balance sheet. 16. ACQUISITIONS AND DISPOSALS OF SUBSIDIARIES AND OTHER BUSINESS UNITS lAS 7 recognizes that an entity may acquire or dispose subsidiaries or other business units during the year and thus requires that the aggregate cash flows from acquisitions and from disposals of subsidiaries or other business units should be presented separately as part of the investing activities section of the statement of cash flows. lAS 7 has also prescribed these disclosures in respect to both acquisitions and disposals: (I) The total consideration included (2) The portion thereof discharged by cash and cash equivalents (3) The amount of cash and cash equivalents in the subsidiary or business unit acquired or dis– posed (4) The amount of assets and liabilities (other than cash and cash equivalents) acquired or dis– posed, summarized by major category 17. OTHER DISCLOSURES REQUIRED AND RECOMMENDED BY lAS 7 Certain unique additional disclosures are prescribed by lAS 7 because such information may enable users of financial statements to gain better insight into the liquidity or solvency of an enterpris e. These addi tional disclosures follow: (I) Required di sclosure. Amount of significant cash and cash equivalent balances held by an entity that are not available for use by the group should be disclosed along with a com– mentary by management.