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BYP 13-7 COMMUNICATION ACTIVITY
MEMO
To: Will Hardin
From: Student
Re: Statement of cash flows
The statement of cash flows provides information about the cash receipts
and cash payments of a firm, classified as operating, investing, and financing
The investing activities section of the statement reports cash flows resulting
from changes in investments and other long-term assets. The company
had a cash outflow from investing activities due to purchases of buildings
and equipment.
The financing activities section of the statement reports cash flows resulting
If you have any further questions, please do not hesitate to contact me.
BYP 13-8 ETHICS CASE
(a) The stakeholders in this situation are:
Samuel Gunkle, president of Wesley Corporation.
Gerald Rondelli, controller.
The Board of Directors.
The stockholders of Wesley Corporation.
(b) The president’s statement, “We must get that amount above $1 million,”
Controller Gerald Rondelli’s reclassification (intentional misclassification)
of a cash inflow from a long-term note (financing activity) issuance to an
“increase in payables” (operating activity) is inappropriate and unethical.
(c) It is unlikely that any board members (other than board members who are
also officers of the company) would discover the misclassification. Board
members generally do not have detailed enough knowledge of their
BYP 13-9 ALL ABOUT YOU
(a) The article describes three factors that determine how much money
you should set aside. (1) Your willingness to take risk. You need to evaluate
how willing you are to experience wide swings in your financial position.
(b) They recommend having at least three months of living expenses set
aside, and up to six months.
(c) Responses to this question will vary. What is most important is that
BYP 13-10 FASB CODIFICATION ACTIVITY
(a) Cash equivalents are short-term, highly liquid investments that have
both of the following characteristics:
a. Readily convertible to known amounts of cash
Generally, only investments with original maturities of three months or
less qualify under that definition. Original maturity means original
maturity to the entity holding the investment. For example, both a
(b) Financing activities include obtaining resources from owners and
providing them with a return on, and a return of, their investment;
(c) Investing activities include making and collecting loans and acquiring
and disposing of debt or equity instruments and property, plant, and
equipment and other productive assets, that is, assets held for or used
BYP 13-10 (Continued)
(d) Operating activities include all transactions and other events that are
not defined as investing or financing activities (see paragraph 230-10-
(e) The primary objective of a statement of cash flows is to provide
relevant information about the cash receipts and cash payments of an
entity during a period.
As indicated in the glossary at this same section, cash includes not
only currency on hand but demand deposits with banks or other
financial institutions. Cash also includes other kinds of accounts that
Thus, the basis for the statement of cash flows is cash, not broader
measures of liquidity, like working capital.
(f) Information about all investing and financing activities of an entity
IFRS EXERCISES
IFRS 13-1
Under IFRS bank overdrafts are treated as part of cash and cash
equivalents on the balance sheet. As a result, on the statement of cash
IFRS 13-2
The treatment of these items under IFRS and GAAP is as follows:
IFRS GAAP
IFRS 13-3
In the future cash equivalents will probably not be combined with cash.
Instead they will most likely be reported separately, as a type of short term
investment.
IFRS 13-4 INTERNATIONAL FINANCIAL REPORTING PROBLEM
(a) The company reports interest paid as an operating activity.
(b) Zetar’s balance in cash and cash equivalents is negative because the
(c) Under GAAP bank overdrafts are not reported in cash and cash
equivalents. Instead they are treated as a financing activity, and would
be reported on the balance sheet as a liability.
(d) The components of the “net movement in working capital” are reported
on the face of the statement of cash flows as
