IAS 7 – Statement of Cash Flows


International Accounting Standard 7: Statement of Cash Flows is one of the important indicator of entity’s financial strength. However, as it is prepared on cash basis whereas other statements on accrual basis a stand alone standard helps preparers of financial statements in preparing it. This standard provides with the format of statement of cash flows and how and where to present different types of cash transactions.

Executive Summary

Cash flows can be classified in three categories, operating, investing and financing activities. Classifying cash flows in such way helps users of financial statements understand how and by what events cash flows occurred. This helps them in understanding the current affairs of the business and its future viability. Operating activities are actual activities through which entity generate profits. Investing activities mean investments made by the entity and financing activities are activities that relate to raising and paying loans in simple words.