Financing activities
Financing activities change the size or composition of the entity’s contributed equity and borrowings. Typical cash flows are proceeds from issuing shares or loans and cash repayments of borrowings. A bonus issue has no cash flow. Under the IFRS 18-amended IAS 7 model for an ordinary non-financial entity, interest paid and dividends paid are classified as financing cash flows.
Worked example
Issuing shares for $40,000 cash and repaying a $10,000 loan produce financing cash inflow of $30,000 before other financing items.
Common mistake
Do not place loan principal repayments in operating expenses or assume all finance-related income and payments have the same cash flow classification.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FA | Direct | September 2026–June 2027 |
| ACCA | FR | Direct | Official assessment-window verification pending |
| ACCA | K1 | Direct | July 2027–August 2028 |
| CIMA | BA3 | Direct | Official assessment-window verification pending |
| CIMA | F1 | Direct | Official assessment-window verification pending |
| FIA | FFA | Direct | September 2026–June 2027 |