![]() The cash flows associated with extraordinary items are disclosed separately as arising from operating, investing or financing activities in the cash flow statement, to enable users to understand their nature and effect on the present and future cash flows of the enterprise. The cash flows associated with extraordinary items should be classified as arising from operating, investing or financing activities as appropriate and separately disclosed. ![]() This amount is presented separately from cash flows from operating, investing and financing activities and include the differences, if any, had those cash flows been reported at the end-of-period exchange rates. However, the effect of exchange rate changes on cash and cash equivalents held or due in a foreign currency is reported in the cash flow statement in order to reconcile cash and cash equivalents at the beginning and the end of the period. Unrealized gains and losses arising from changes in foreign exchange rates are not cash flows. For example, a weighted average exchange rate for a period may be used for recording foreign currency transactions. This permits the use of an exchange rate that approximates the actual rate. The effect of changes in exchange rates on cash and cash equivalents held in a foreign currency should be reported as a separate part of the reconciliation of the changes in cash and cash equivalents during the period.Ĭash flows denominated in foreign currency are reported in a manner consistent with Accounting Standard (AS) 11, According for the Effects of Changes in Foreign Exchange Rates. In addition to the cash flows described, AS-3 (Revised) also deals with certain other items as shown below:Ĭash flows arising from transactions in a foreign currency should be recorded in an enterprises reporting currency by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the cash flow:Ī rate that approximates the actual rate may be used if the result is substantially the same as would arise, if the rates at the date of cash flows were used. (A) Reporting Cash Flows from Operating Activities:Īn enterprise should report cash flows from operating activities using either: ![]() For example, when the installment paid in respect of fixed assets acquired on deferred “payment basis includes both interest and loan, the interest element is classified under financing activities and the loan element is classified under investing activities. This information may also be used to evaluate the relationships among those activities.Ī single transaction may include cash flows that are classified differently. Classification by activity provides information that allows users to assess the impact of those activities on the financial position of the enterprise and the amount of its cash and cash equivalents. An enterprise presents its cash flows from operating, investing and financing activities in a manner which is most appropriate to its business. The Cash Flow Statement should report cash flows during the period classified by operating, Investing and Financing Activities. In this article we will discuss about the preparation of cash flow statement, explained with the help of suitable illustrations.
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