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Chapter
5 /
Cash Flow Statement s (lA S 7)
Practical Insight
The term used is "significant," which has not been defined in lAS 7. This may cause interpre–
tational problems while applying this provision of lAS 7 in practice.
43
(2) Recommended disclosures. Entities are
encouraged
to make these disclosures, together
with a commentary by management:
a] Amount of undrawn borrowing facilities, indicating restrictions on their use, if any
b) In case of investment s in joint ventures, which are accounted for using proportionate
consolidation, the aggregate amount of cash flows from operating, investing, and fi–
nancing activities that are attributable to the investment in the joi nt venture
c] Aggregate amount of cash flows that are attributable to the increase in operating capac–
ity separately from those cash flows that are requ ired to maintain operating capacity
d] Amount of cash flows segregated by reported industry and geog raphical segments
Practical In sight
These "recommended" disclosures are unique to lAS 7. Such disclosures are not required un–
der other accounting standards (not even under U.S. generally accepted accounting principles).
They are useful in enabling the users of financial statements to under stand the enterprise' s fi–
nancial position better.
Comprehensive Case Study
This case study shows the preparation of the cash flow statement under lAS 7 under the direct and
indirect methods.
Facts
Financial information for Tremendous Enterprises Inc. for the year ended December 3 1, 2005, follows:
Tremendous Enterprises II/c.
BALANCE SHEETS
As of Decemb er 31, 2005, and 2004
2005
Assets
Cash and cash equivalents
Trade receivables
Inventory
Intangib le asset, net
Due from associates
Property, plant, and equipment, cost
Accumulated depreciation
Property, plant, and equipment, net
Total assets
Liabilities
Accounts payable
Income taxes payable
Deferred taxes payable
Total liabilities
Shareholders 'eql/iry
Share capital
Retained earnings
Total shareholders' equity
Total liabilities and shareholders' equity
$ 4,500
7,500
3,000
1,500
28,500
18,000
(7500)
10500
$5.5...500
$ 7,500
3,000
4500
15 000
9,750
30750
40500
$5.5...500
$ 1,500
3,750
2,250
2,250
28,500
33,750
(9 000)
24 750
$63..QQQ
$18,750
1,500
..J....Q.QQ
23250
9,750
30000
.:22..12Q
$63..illill