IAS 7 Statement of Cash Flows

IAS 7 prescribes how to present information in a statement of cash flows about how an entity’s cash and cash equivalents changed during the period. 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 that are subject to an insignificant risk of changes in value.

The statement classifies cash flows during a period into cash flows from operating, investing and financing activities:

• operating activities are the principal revenue-producing activities of the entity and other activities that are not investing or financing activities. An entity reports cash flows from operating activities using either:
  • the direct method, whereby major classes of gross cash receipts and gross cash payments are disclosed; or
  • the indirect method, whereby profit or loss is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and items of income or expense associated with investing or financing cash flows.

  Investing and financing transactions that do not require the use of cash or cash equivalents are excluded from a statement of cash flows but separately disclosed. IAS 7 requires an entity to disclose the components of cash and cash equivalents and to present a reconciliation of the amounts in its statement of cash flows with the equivalent items reported in the statement of financial position.

  Standard history

  In April 2001 the International Accounting Standards Board (Board) adopted IAS 7 Cash Flow Statements, which had originally been issued by the International Accounting Standards Committee in December 1992. IAS 7 Cash Flow Statements replaced IAS 7 Statement of Changes in Financial Position (issued in October 1977).

  As a result of the changes in terminology used throughout the IFRS Standards arising from requirements in IAS 1 Presentation of Financial Statements (issued in 2007), the title of IAS 7 was changed to Statement of Cash Flows.

  In January 2016 IAS 7 was amended by Disclosure Initiative (Amendments to IAS 7). These amendments require entities to provide disclosures about changes in liabilities arising from financing activities.

  In May 2023 the Board issued Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7) to require an entity to provide additional disclosures about its supplier finance arrangements.

  Other Standards have made minor consequential amendments to IAS 7. They include IFRS 10 Consolidated Financial Statements (issued May 2011), IFRS 11 Joint Arrangements (issued May 2011), Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27) (issued October 2012), IFRS 16 Leases (issued January 2016) and IFRS 17 Insurance Contracts (issued May 2017).