Technical Summary
This extract has been prepared by IASC Foundation staff and has not been approved by the IASB.
For the requirements reference must be made to International Financial Reporting Standards.
IAS 7 Cash Flow Statements
The objective of this Standard is to require the provision of information about the
historical changes in cash and cash equivalents of an entity by means of a cash flow
statement which classifies cash flows during the period from operating, investing and
financing activities.
Cash flows are inflows and outflows of cash and cash equivalents. Cash comprises
cash on hand and demand deposits. Cash equivalents are short-term, highly liquid
investments that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value.
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 utilise those cash flows. The economic
decisions that are taken by users require an evaluation of the ability of an entity to
generate cash and cash equivalents and the timing and certainty of their generation.
The cash flow statement shall report cash flows during the period classified by
operating, investing and financing activities.
Operating activities
Operating activities are the principal revenue-producing activities of the entity and
other activities that are not investing or financing activities. 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.
The amount of cash flows arising from operating activities is a key indicator of the
extent to which the operations of the entity have generated sufficient cash flows to
repay loans, maintain the operating capability of