The Statement of Cash Flows

A Historical Perspective on the Statement of Cash Flows

In 1987, the Financial Accounting Standards Board (FASB) issued an accounting standard, FASB Statement no. 95, requiring that the statement of cash flows be presented as one of the three primary financial statements. Previously, companies had been required to present a statement of changes in financial position, often called the funds statement. In 1971, APC Opinion no. 19 made the funds statement a required financial statement although many companies had begun reporting funds flow information several years earlier.

The funds statement provided useful information, but it had several limitations. First, APB Opinion no. 19 allowed considerable flexibility in how funds could be defined and how they were reported on the statement. Read more

Investments in Associates – Highlights

Just as a starter, two definitions!

Associate: An entity, including an unincorporated entity such as a partnership, over which an investor has significant influence and which is neither a subsidiary nor an interest in a joint venture.

Significant influence: The power to participate in the financial and operating policy decisions of the investee but it is not control or joint control over those policies.… Read more

Disclosures subsidiaries and NCI

IFRS 12 requires disclosures for each of an entity’s subsidiaries that have material non-controlling interests. Such disclosures assist users when estimating future profit or loss and cash flows (for example, by identifying the assets and liabilities that are held by subsidiaries, risk exposures of particular group entities, and those subsidiaries that have significant cash flows). The disclosures are as follows (new disclosures compared to the previous standard are in bold):

  • The subsidiary’s name
  • Its principal place of business (and country of incorporation, if different)
  • The proportion of ownership interests held by non-controlling interests
  • The proportion of voting rights held by noncontrolling interests, if different from the proportion of ownership interests held
  • The profit or loss allocated to non-controlling interests of
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An error in previously issued financial statements

Adjustment of an error in previously issued financial statements is not an accounting change. Such errors include mathematical mistakes, mistakes in the application of accounting principles, or oversight or misuse of facts that existed at the time financial statements were prepared.

– IN SHORT – Adjustments of accounting errors.An error in previously issued financial statements

  1. If detected in period error occurred correct accounts through normal accounting cycle adjustments.
  2. If detected in a subsequent period, adjust for effect of material errors by making prior-period adjustments directly to retained earnings balance for the years affected by those errors. lf the error relates to a year that is not presented in the financial statements, the retained earnings balance for the earliest year presented is adjusted. Also correct each item
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IFRS 3 Acquired process is substantive?

IFRS 3 requires a business to include, as a minimum, an input and a substantive process that together significantly contribute to the ability to create output. Because all asset acquisitions include inputs, the existence of a substantive process is what distinguishes an asset or group of assets from a business. Entities can no longer presume that a set contains a process if the set generates revenues before and after the transaction. Further analysis is required to determine whether the set contains a substantive process.

Implementation of IFRS 3 revealed difficulties in assessing whether the acquired processes are sufficient to constitute one of the elements of a business; whether any missing processes are so significant that an acquired set of activities Read more

Overview of the amendments IFRS 3

In May 2019 amendments to IFRS 3 Business Combinations were published by IASB. See the introduction in Redefinition of a business.

IFRS 3 continues to adopt a market participant’s perspective to determine whether an acquired set of activities and assets is a business. The amendments: clarify the minimum requirements for a business; remove the assessment of whether market participants are capable of replacing any missing elements; add guidance to help entities assess whether an acquired process is substantive; narrow the definitions of a business and of outputs; and introduce an optional fair value concentration test. Overview of the amendments IFRS 3 Business Combinations

Minimum requirements to be a business  Overview of the amendments IFRS 3 Business Combinations

In the … Read more