The content and methodology of the statement of cash flows
Under the new accounting system introduced reporting "cash flow" form № 3. The purpose of this report is to provide users of financial statements complete, accurate and unbiased information about the changes that occur with cash and cash equivalents of the enterprise for the period.
The formulation cash flow statement is an indirect method that involves the determination of net income or expense from operating activities by adjusting the profit from ordinary activities before tax. The information base for this report are indicators of the balance sheet, income statement data and analytical accounting.
The impact on earnings of non-cash expenses (unit 2) takes into consideration depreciation on fixed assets, which, although reduced profits, but remain available to the company, adding to his cash.
It should also consider changing the amount of provision for future expenses and payments not related to investing and financing activities. For example, charges for warranty costs during their growth must be added to operating income, as they are not cash outflows, while leading to increased costs. If these software are reduced, they are deducted from profits, as occurred spending money.
This unit takes into account the impact of losses (gains) on unrealized exchange differences, articles receivables and payables in foreign currencies related to investing and financing activities, as well as the recalculation of balances in foreign currency. Changes in exchange rates is not related to cash flow.
Not to overstate or understate the rate of cash from operating activities, adjusted their profit or loss from the revaluation of non-operating receivable or payable in foreign currency.
In order to make a profit from operating activities should be of total income reported in box 1, subtract the income from investing and financing activities and add the loss of most of these activities.
To determine the amount of cash from operating activities (unit 4), must take into account changes in current assets, changing costs and deferred and current liabilities. Change in current assets is taken into account when it is due to operating activities (unit 3).
For example, if the receivables of buyers has increased, then this value should be deducted from profits because the money is not received on account of the company and vice versa.
Net cash flow from operating activities (unit 5) is defined as the difference between cash flows from operating activities and paid interest, income taxes, resulting in cash flow due to emergencies. Examples of cash flows from extraordinary events are receipts from insurance companies to assist employees affected by the disaster.