Hot tip for December!

These parts are also interesting:

“An individual transaction may include cashflows that are classified differently. For example, when a loan repayment includes both interest and capital, the interest element may be classified as an operating cashflow while the capital element is classified as a financing cash-flow.”

and

“Cash equivalents are defined as ‘short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value’. IAS 7 does not define ‘short-term’ but does state that ‘an investment normally qualifies as a cash equivalent only when it has a short maturity of, say, three months or less from the date of acquisition’.”

and

“In consolidated financial statements, cashflows arising from changes in the ownership of a subsidiary that does not result in a loss of control are classified as cashflows from financing activities. Also, consideration paid in a business combination is treated as an investing activity. However, in more complex scenarios the guidance in IAS 7 is not always clear.”

and

“When a subsidiary joins or leaves the group, its cashflows should be included in the consolidated statement of cashflows for the same period as the results are reported in the consolidated statement of profit or loss and other comprehensive income.”

and

“When the reporting entity holds foreign currency cash and cash equivalents, these are monetary items that will be retranslated at the reporting date in accordance with IAS 21. Any exchange differences arising on this retranslation will have increased or decreased these cash and cash equivalent balances.

As these exchange differences do not give rise to any cashflows, they should not be reported as any part of the cashflow activities presented in the statement of cashflows. Their net impact should be disclosed as a reconciling item between opening and closing balances of cash and cash equivalents.”

“A change in accounting policy should only be made if the change is required by IFRS, or it will result in the financial statements providing reliable and more relevant financial information. Significant changes in policy other than those specified by IFRS should be relatively rare. IFRS specifies the accounting policies for a high percentage of the typical transactions that are faced by entities”

https://www2.accaglobal.com/members/publications/accounting_business/CPD/professional-judgment

One last bit which I’ll try to remember!

In 2010, the question did ask the difference between Direct and Indirect, together with the advantages/disadvantages?