IFRS
CHAPTER 12
Discuss the accounting procedure for the statement of
cash flows under GAAP and IFRS.
•As in GAAP, the statement of cash flows is a required
statement for IFRS. In addition, the content and
presentation of an IFRS statement of cash flows is similar
to the one used for GAAP. However, the disclosure
requirements related to the statement to cash flows are
more extensive under GAAP. IAS 7 (“Cash Flow
Statements”) provides the overall IFRS requirements for
cash flow information.
•KEY POINTS
•Companies preparing financial statements under IFRS must prepare
a statement of cash flows as an integral part of the financial
statements.
•Both IFRS and GAAP require that the statement of cash flows should
have three major sections—operating, investing, and financing—
along with changes in cash and cash equivalents.
•Similar to GAAP, the cash flow statement can be prepared using
either the indirect or direct method under IFRS. In both U.S. and
international settings, companies choose for the most part to use the
indirect method for reporting net cash flows from operating activities.
•The definition of cash equivalents used in IFRS is similar to that used
in GAAP. A major difference is that in certain situations, bank
overdrafts are considered part of cash and cash equivalents under
IFRS (which is not the case in GAAP). Under GAAP, bank overdrafts
are classified as financing activities in the statement of cash flows and
are reported as liabilities on the balance sheet.
