Chapter 1: Objective and scope of IAS 7

IAS 7 requires all entities to prepare a cash flow statement as an integral part of their financial statements for each period for which financial statements are presented. The cash flow statement reports changes in cash and cash equivalents in the period, classifying these as arising from operating, investing, or financing cash flows. Comparative figures are required for all items reported in the cash flow statement and the supplementary notes.

Requirement to prepare consolidated cash flow statements IAS 7 applies to the cash flow statements of both group entity and separate entity financial statements. Therefore, a group that is required to prepare a consolidated balance sheet and a consolidated income statement should prepare a consolidated cash flow statement reflecting the group’s cash flows, including any cash flows from joint operations, and adjusting to eliminate those cash flows that are internal to the group. Only those cash receipts and payments that flow to and from the group entity as a whole should be included. Where acquisitions and disposals take place during a financial year, the group’s cash flows should include the subsidiary’s cash flows for the portion of the year that the subsidiary is consolidated by the group. This should be the same period for which the subsidiary’s results are included in the group’s income statement. All cash flows between the group and the subsidiary for that period are eliminated. The treatment of non-controlling interests in the consolidated cash flow statement should be consistent with the overall approach to non-controlling interests followed in preparing the group financial statements. IFRS 10 requires entities to eliminate intra-group balances and intra-group transactions in the consolidated financial statements. Therefore, they should do the same in preparing a consolidated cash flow statement, even where non-controlling interests are involved. Intragroup transactions should be eliminated. This is because the group, including partly owned subsidiaries, is a single reporting entity for financial reporting purposes. Only cash flows that are external to the group, which includes those with non-controlling interests, are reflected in the cash flow statement.