Thank you for your response
Thank you for your response
Our representative will get in touch with you shortly.
Let’s understand in detail about AS 3 Cash Flow Statements:
The applicability of Cash flow statement has been defined under the Companies Act, 2013. As per the definition in the act, a financial statement includes the following:
♦ OPC means a company which has only one single person as its member.
♦ A Small Company is a private company with a maximum paid up capital of Rs. 50 lakhs and a maximum turnover of Rs. 2 crores.
♦ A Dormant Company is an inactive company which is formed for some future projects or only to hold an asset and has no significant transactions.
Cash equivalents are held by an enterprise for meeting its short-term cash commitments instead of the purpose of investment or such other purposes. For investments to qualify as cash equivalents:
A cash flow statement must depict the cash flows within the period classifying them as
Cash flows from operating activities predominantly result from the main revenue-generating activities of an enterprise. For example:
Cash flows from investing activities represent outflows are made for resources intended for generating cash flows and future income. For instance:
Financing activities are those which brings changes in composition and size of owner’s capital and borrowings of an enterprise. For instance:
A company must report its cash flows from operating activities using:
1. Direct method – Where all the major classes of cash receipts and cash payments are presented; or
2. Indirect method – Where the net profit or net loss is adjusted for:
A company must separately record all the major classes of cash receipts and cash payments that arise from financing and investing activities, barring the ones which need to be reported on a net basis.
Cash flows which arise from below-mentioned operating, financing or investing activities might be reported on a net basis:
Cash flows which arise from each of the below-mentioned activities of any financial enterprise might be reported on the net basis:
Cash flows that arise from the transactions in the foreign currencies must be recorded in the company’s reporting currency by using the below method: Foreign currency amount * FX rates between the reporting and foreign currency at the date of cash flow.
A rate which approximates actual rate might be used in case the outcome is largely the same as it would have been if the rate at the date of cash flows was used. The impact of changes in the exchange rate on cash and cash equivalents which is held in the foreign currencies must be reported as a distinct and separate part of the reconciliation of changes in the cash and cash equivalent during the relevant period.
The cash flows related to the extraordinary items must be categorized as arising from operating, financing or investing activities as apt and disclosed distinctly. Cash flows from dividends and interest received and paid must be separately disclosed.
Cash flows which arise from dividends and interest received and paid in the case of financial enterprises must be categorized as cash flows from operating activities.
For other enterprises, cash flows which arise from interest paid must be categorized as cash flows from the financing activities whereas dividends and interest received must be categorized as cash flows from the investing activities. Any dividends paid must be categorized as cash flows from the financing activities.
Cash flows which arise from taxes on income must be disclosed separately and must be reported as cash flows from the operating activities except if they could be explicitly related to investing and financing activities.
The aggregate cash flows which arise from acquisition and from the disposal of business units including subsidiaries must be shown as investing activities and reported separately. Enterprises must present, in total, with respect to both the acquisitions and disposals of other business units including subsidiaries within the period the followings:
Financing and investing transactions which don’t require cash or cash equivalents mustn’t be included in the cash flow statement. Those transactions must be presented elsewhere in financial statements in a way which gives relevant information about such financing and investing activities.
Enterprises must disclose, along with management commentary, the amount of substantial cash and cash equivalents held by an enterprise which isn’t available for use. Commitments that may arise from discounted bills of exchange and other similar obligations that are undertaken by an enterprise are typically disclosed in financial statements by means of notes, even in case the probability of loss is remote.
|Particulars||AS 3 Cash Flow Statements||Ind AS 7 Statement of Cash Flows|
|Bank Overdrafts||AS 3 it doesn’t have any such requirement||Ind AS 7 explicitly includes bank overdrafts as a part of cash and cash equivalents that are repayable on demand|
|Cash flow from extraordinary activities||AS 3 necessitates cash flows related to the extraordinary activities to be classified as cash flow arising from operating, financing and investing activities||Ind AS 7 doesn’t contain such requirement|
|Cash flow from changes in ownership of interests in subsidiaries||AS 3 doesn’t have any such requirements||Ind AS 7 needs classification of cash flows which arises from changes in the ownership interests in the subsidiaries which does not result in the loss of control as the cash flows from financing activities|
|Accounting for investments in a subsidiary or an associate||AS 3 doesn’t have any such requirement||Ind AS 7 requires the use of Cost or Equity method when accounting for investments in a subsidiary or an associate|
|Disclosure requirements||AS 3 require fewer disclosure requirements as compared to Ind AS 7||Ind AS 7 requires more disclosure requirements|