Illustrative Examples

The following additional information is also relevant for the preparation of the statements of cash flows: 

• all of the shares of a subsidiary were acquired for 590. The fair values of assets acquired and liabilities assumed were as follows:

	Inventories	100
	Accounts receivable	100
	Cash	40
	Property, plant and equipment	650
	Trade payables	100
	Long-term debt	200

• 250 was raised from the issue of share capital and a further 250 was raised from long‑term borrowings.

• interest expense was 400, of which 170 was paid during the period. Also, 100 relating to interest expense of the prior period was paid during the period.

• dividends paid were 1,200.

• the liability for tax at the beginning and end of the period was 1,000 and 400 respectively. During the period, a further 200 tax was provided for. Withholding tax on dividends received amounted to 100.

• during the period, the group acquired property, plant and equipment and right‑of‑use assets relating to property, plant and equipment with an aggregate cost of 1,250, of which 900 related to right‑of‑use assets. Cash payments of 350 were made to purchase property, plant and equipment.

• plant with original cost of 80 and accumulated depreciation of 60 was sold for 20.

• accounts receivable as at the end of 20X2 include 100 of interest receivable.

Consolidated statement of comprehensive income for the period ended 20X2(a)
Sales	30,650
Cost of sales	(26,000)
Gross profit	4,650
Depreciation	(450)
Administrative and selling expenses	(910)
Interest expense	(400)
Investment income	500
Foreign exchange loss	(40)
Profit before taxation	3,350
Taxes on income	(300)
Profit	3,050
(a) The entity did not recognise any components of other comprehensive income in the period ended 20X2

Consolidated statement of financial position as at end of 20X2
			20X2				20X1
Assets
Cash and cash equivalents			230				160
Accounts receivable			1,900				1,200
Inventory			1,000				1,950
Portfolio investments			2,500				2,500
Property, plant and equipment at cost	3,730				1,910
Accumulated depreciation	(1,450)				(1,060)
Property, plant and equipment net			2,280				850
Total assets			7,910				6,660
Liabilities
Trade payables			250				1,890
Interest payable			230				100
Income taxes payable			400				1,000
Long-term debt			2,300				1,040
Total liabilities			3,180				4,030
Shareholders’ equity
Share capital			1,500				1,250
Retained earnings			3,230				1,380
Total shareholders’ equity			4,730				2,630
Total liabilities and shareholders’ equity			7,910				6,660

Direct method statement of cash flows (paragraph 18(a))
			20X2
Cash flows from operating activities [Refer:paragraph 10]
Cash receipts from customers [Refer:paragraph 14]	30,150
Cash paid to suppliers and employees [Refer:paragraph 14]	(27,600)
Cash generated from operations	2,550
Interest paid [Refer:paragraphs 31⁠–⁠33]	(270)
Income taxes paid [Refer:paragraphs 35 and 36]	(900)
Net cash from operating activities			1,380
Cash flows from investing activities [Refer:paragraph 10]
Acquisition of subsidiary X, net of cash acquired (Note A) [Refer:paragraphs 39 and 42]	(550)
Purchase of property, plant and equipment (Note B) [Refer:paragraph 21]	(350)
Proceeds from sale of equipment [Refer:paragraph 21]	20
Interest received [Refer:paragraphs 31 and 33]	200
Dividends received [Refer:paragraphs 31 and 33]	200
Net cash used in investing activities			(480)
Cash flows from financing activities [Refer:paragraph 10]
Proceeds from issue of share capital [Refer:paragraph 21]	250
Proceeds from long-term borrowings [Refer:paragraph 21]	250
Payment of lease liabilities [Refer:paragraph 21]	(90)
Dividends paid(a) [Refer:paragraphs 31 and 34]	(1,200)
Net cash used in financing activities			(790)
Net increase in cash and cash equivalents			110
Cash and cash equivalents at beginning of period (Note C)			120
Cash and cash equivalents at end of period (Note C)			230
(a) This could also be shown as an operating cash flow.

Indirect method statement of cash flows (paragraph 18(b))
				20X2
Cash flows from operating activities [Refer:paragraph 10]
Profit before taxation [Refer:paragraph 20]		3,350
Adjustments for:
	Depreciation [Refer:paragraph 20(b)]	450
	Foreign exchange loss [Refer:paragraph 20(b) and (c)]	40
	Investment income [Refer:paragraph 20(c)]	(500)
	Interest expense	400
		3,740
	Increase in trade and other receivables [Refer:paragraph 20(a)]	(500)
	Decrease in inventories [Refer:paragraph 20(a)]	1,050
	Decrease in trade payables [Refer:paragraph 20(a)]	(1,740)
Cash generated from operations [Refer:paragraph 20]		2,550
Interest paid [Refer:paragraphs 31⁠–⁠33]		(270)
Income taxes paid [Refer:paragraphs 35 and 36]		(900)
Net cash from operating activities				1,380
Cash flows from investing activities [Refer:paragraph 10]
Acquisition of subsidiary X net of cash acquired (Note A) [Refer:paragraphs 39 and 42]		(550)
Purchase of property, plant and equipment (Note B) [Refer:paragraph 21]		(350)
Proceeds from sale of equipment [Refer:paragraph 21]		20
Interest received [Refer:paragraphs 31 and 33]		200
Dividends received [Refer:paragraphs 31 and 33]		200
Net cash used in investing activities				(480)
Cash flows from financing activities [Refer:paragraph 10]
Proceeds from issue of share capital [Refer:paragraph 21]		250
Proceeds from long-term borrowings [Refer:paragraph 21]		250
Payment of lease liabilities [Refer:paragraph 21]		(90)
Dividends paid(a) [Refer:paragraphs 31 and 34]		(1,200)
Net cash used in financing activities				(790)
Net increase in cash and cash equivalents				110
Cash and cash equivalents at beginning of period (Note C)				120
Cash and cash equivalents at end of period (Note C)				230
(a) This could also be shown as an operating cash flow.