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CORPORATE FINANCIAL REPORTING

23 The Cash Flow Statement

1 Dilutive Securities and EPS

THE CASH FLOW STATEMENT (FAS 95 or ASC 230)


Operating activities Investing activities Financing activities Increase/decrease in cash Cash, beginning of year xxxx xxxx xxxx xxxx xxx

Cash, end of the year

xxxx

THE CASH FLOW STATEMENT


Operating activities
whats not investing or financing

Investing activities

acquiring/disposing of non-current assets (including buying/selling Securities Available For Sale) & lending and being repaid the principal amount loaned borrowing and repaying the principal amount borrowed & all cash transactions with shareholders
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Financing activities

THE CASH FLOW STATEMENT


Suppose you saw the following under ASSETS on a companys balance sheet: (in $ 000) 2012 2011 Land 10,000 4,000
and under LIABILITIES there were no liabilities for a land purchase.

THE CASH FLOW STATEMENT


Suppose you saw the following under ASSETS on a companys balance sheet: (in $ 000) 2012 2011 Land 10,000 4,000
and under LIABILITIES there was: 2012 Mortgage payable for land 5,000 2011 -05

THE CASH FLOW STATEMENT


Suppose you saw the following under ASSETS on a companys balance sheet: (in $ 000) 2012 2011 Land 10,000 24,000
And on the 2012 financial statements there was no mention of a land impairment loss.

THE CASH FLOW STATEMENT


Suppose you saw the following under ASSETS on a companys balance sheet: (in $ 000)
2012 2011 Land 10,000 24,000 Nothing about a receivable from sale of land. And on the 2012 income statement you saw

Gain on land sale

5,000

THE CASH FLOW STATEMENT


Suppose you saw the following under ASSETS on a companys balance sheet: (in $ 000)
Land Mortgage receivable-land 2012 10,000 8,000 2011 24,000 0

And on the 2012 income statement you saw

Gain on land sale

5,000

THE CASH FLOW STATEMENT


Suppose you saw the following under ASSETS on a companys balance sheet: (in $ 000) 2012 2011 Land 10,000 24,000
And on the 2012 income statement you saw

Land impairment loss

14,000

THE CASH FLOW STATEMENT


Suppose you saw the following under OWNERS EQUITY on a companys balance sheet: (in $ 000)

2012 Capital stock 10,000 Additional paid in capital 14,000

2011 7,000 9,000

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THE CASH FLOW STATEMENT For the most part, that is the approach companies take to prepare the Investing Activities and the Financial Activities parts of their cash flow statements they compare balances on the balance sheet.
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THE CASH FLOW STATEMENT

But for Operating Activities, which is based, in part, on the income statement, companies have a choice: the direct method or the indirect method, both give you the same answer, using different approaches.
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