CODIFICATION RESEARCH CASE
(a) According to FASB ASC 230-10–10 (Statement of Cash Flows/Overall/
Objectives):
10-1 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 (230–10-20), cash
(b) See FASB ASC 230-10-10 (Statement of Cash Flows—Objectives)
10-2 The information provided in a statement of cash flows, if used
with related disclosures and information in the other financial
statements, should help investors, creditors, and others (including
donors) to do all of the following:
CODIFICATION RESEARCH CASE (Continued)
(c) According to FASB ASC 230-10–45-16 to 17:
45–16 All of the following are cash inflows for operating activities:
a. Cash receipts from sales of goods or services, including
receipts from collection or sale of accounts and both short-
b. Cash receipts from returns on loans, other debt instruments of
other entities, and equity securities—interest and dividends.
45–17 All of the following are cash outflows for operating activities:
a. Cash payments to acquire materials for manufacture or goods
for resale, including principal payments on accounts and both
CODIFICATION RESEARCH CASE (Continued)
c. Cash payments to governments for taxes, duties, fines, and
other fees or penalties and the cash that would have been paid
for income taxes if increases in the value of equity instruments
d. Cash payments to lenders and other creditors for interest,
including the portion of the payments made to settle zero–
coupon debt instruments that is attributable to accreted
interest related to the debt discount or the portion of the
e. Cash payment, or the portion of the payments, not made soon
after the acquisition date of a business combination by an
acquirer to settle a contingent consideration liability that
f. All other cash payments that do not stem from transactions
defined as investing or financing activities, such as payments
IFRS CONCEPTS AND APPLICATION
IFRS23.1
IAS 7, “Cash Flow Statements,” provides the overall IFRS requirements for
cash flow information.
IFRS23.2
As in U.S. GAAP, the statement of cash flows is a required statement for
IFRS. In addition, the content and presentation of an IFRS statement of cash
flows is similar to one used for U.S. GAAP. However, the disclosure
requirements related to the statement of cash flows are more extensive
under U.S. GAAP.
Other similarities include: (1) Companies preparing financial statements
Notable differences are (1) IFRS encourages companies to disclose the
aggregate amount of cash flows that are attributable to the increase in
operating capacity separately from those cash flows that are required to
maintain operating capacity; (2) The definition of cash equivalents used in
IFRS is not the same as that used in U.S. GAAP. A major difference is that in
IFRS23.3
Presently, the FASB and the IASB are involved in a joint project on the
presentation and organization of information in the financial statements. The
IFRS23.4
Examples of non-cash transactions are (1) issuance of shares for non-cash
IFRS23.5
(a) Operating—add to net income.
(b) Financing activity.
(c) Investing activity.
IFRS23.6
(a) The solution can be determined through the use of a T-account for
Property, Plant, and Equipment.
Property, Plant & Equipment
12/31/19
247,000
Equipment sold
277,000
(b) The solution can be determined through the use of a T-account for
Accumulated Depreciation.
Accumulated Depreciation
167,000
12/31/19
38,000
Depreciation expense
Equipment sold
?
178,000
12/31/20
IFRS23.6 (Continued)
(c) The cash dividends paid can be determined by analyzing T-accounts
for Retained Earnings and Dividends Payable.
Retained Earnings
91,000
12/31/19
Dividends declared
?
31,000
Net income
104,000
12/31/20
12/31/19
18,000
Dividends declared
12/31/20
(d) The redemption of bonds payable amount is determined by setting up
a T-account for Bonds Payable.
Bonds Payable
46,000
12/31/19
25,000
Issuance of B/P for PP&E
Redemption of B/P
?
49,000
12/31/20
IFRS23.6 (Continued)
Redemption of bonds payable = $46,000 + $25,000 – $49,000
IFRS23.7
DINGEL CORPORATION
Statement of Cash Flows
For the Year Ended December 31, 2020
Cash flows from operating activities
Net income………………………………………………….. $14,750(a)
Adjustments to reconcile net income to net
cash provided by operating activities:
Cash flows from investing activities
Sale of equity investments …………………………... 4,700
Sale of equipment …………………………..…………… 2,500
Purchase of equipment (cash) ……………………… (20,000)
Proceeds from flood damage to building ………. 32,000
Net cash provided by investing activities ……… 19,200
IFRS23.7 (Continued)
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest ……………………………………………………………… $ 2,000
Supporting Computations:
(a) Ending retained earnings ……………………………………. $20,750
Beginning retained earnings ………………………………. (6,000)
Net income ……………………………………………………. $14,750
(b) Cost …………………………………………………………………… $11,000
Accumulated depreciation (40% X $11,000) ………….. (4,400)
IFRS23.8
(a) According to IAS 7, “Information about the cash flows of an entity is
useful in providing users of financial statements with a basis to
assess the ability of the entity to generate cash and cash equivalents
and the needs of the entity to utilize those cash flows. The economic
(b) According to paragraph 10, “The statement of cash flows shall report
cash flows during the period classified by operating, investing and
financing activities.” Further, paragraph 11 states “An entity presents
(c) According to paragraph 14, “Cash flows from operating activities are
primarily derived from the principal revenue-producing activities of
the entity. Therefore, they generally result from the transactions and
other events that enter into the determination of profit or loss. Examples
of cash flows from operating activities are:
(a) cash receipts from the sale of goods and the rendering of services;
(b) cash receipts from royalties, fees, commissions, and other revenue;
IFRS23.9
(a) M&S uses the indirect method to compute and report net cash
generated from operating activities, the details of which are presented
(b) The most significant item in the investing activities section is the
£309.1 million that M&S spent on “property, plant and equipment.” The
most significant item in the financing activities section is dividends
paid (£377.5 million).