Question 1

Discuss the potential limitations of the statement of cash flows.

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Question 2

Which of the following would not be an operating activity cash outflow?
A) taxes paid
B) acquisition of goods and services
C) acquisition of intangible assets
D) employee benefits paid

Accepted Answer

Acquisition of intangible assets is a capital expenditure and is considered an investing activity cash outflow, not an operating activity cash outflow. The other options listed (taxes paid, acquisition of goods and services, and employee benefits paid) are all considered operating activities and cash outflows.

Question 3

Explain how the form and content of the statement of cash flow could change as a result of a joint project by the IASB and the US Financial Accounting Standards Board (FASB)investigating the presentation of financial statements.

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Question 4

Discuss the treatment of interest and dividends in accordance with AASB 107 Statement of Cash Flows.

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Question 5

It is currently argued that the presentation of the various financial statements lack:
A) cohesiveness
B) understanding
C) clarity
D) flexibility

Accepted Answer

The argument is that financial statements often lack cohesiveness, meaning they do not present a unified and consistent view of a company's financial position and performance.

Question 6

The following are cash flow transactions for Greenfell Ltd:
$$\begin{array} { | l | l | } 
\hline \text { I } & \text { Depreciation and amortisation } \
\hline \text { II } & \text { Impairment loss } \
\hline \text { III } & \text { Issue of bonus shares } \
\hline IV & \text { Conversion of debt to equity } \
\hline V & \text { Purchase of property plant and equipment } \
\hline VI & \text { Dividend reinvestment } \
\hline
\end{array}$$
Which of the following combinations includes all the non-cash investing and financing transactions of Greenfell Ltd that are required to be disclosed in the notes to the accounts as per AASB 107 Statement of Cash Flows?
A) I and II
B) I, II and VI
C) III, IV and V
D) III, IV and VI

Accepted Answer

Non-cash investing and financing transactions are not reported in the statement of cash flows but must be disclosed in the notes. Issue of bonus shares (III), conversion of debt to equity (IV), and dividend reinvestment (VI) are examples of such transactions.

Question 7

Explain why AASB 107 requires disclosures to be made about non-cash financing and investing activities.

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Question 8

Walter (1987)claimed that 'one of the strongest antidotes to creative accounting is a requirement for statement of cash flows to have '.
A) previous year comparisons
B) disclosures
C) details of transactions
D) details of key accounts

Accepted Answer

Walter claimed that disclosures in statement of cash flows can act as a strong antidote to creative accounting. The disclosures can provide transparency and clarity about the company's cash flow and prevent manipulation in financial reporting. Previous year comparisons, details of transactions, and details of key accounts are also important components of the statement of cash flows, but they may not necessarily act as strong antidotes to creative accounting.

Question 9

'Cash flows from operations would seem to provide a reasonable guide to the ability of a firm to service debt'.Discuss.

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Question 10

Which of the following statements is not in accordance with AASB 107 Statement of Cash Flows?
A) The statement of cash flows shall report cash flows during the period classified by operating, investing and financing activities.
B) Investing and financing transactions that do not require the use of cash or cash equivalents shall be excluded from a statement of cash flows.
C) Investing and financing activities that do not have a direct impact on current cash flows but affect the capital and asset structure of an entity should be included in the statement of cash flows.
D) Cash flows arising from taxes on income shall be separately disclosed and shall be classified as cash flows from operating activities unless they can be specifically identified with financing and investing activities.

Accepted Answer

According to AASB 107, investing and financing activities that do not have a direct impact on current cash flows but affect the capital and asset structure of an entity should be disclosed in the notes to the financial statements, not in the statement of cash flows.

Question 11

Describe the application of AASB 107 to interest and dividends received.

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Question 12

Discuss the differences between the direct and indirect methods when reporting cash flows from operating activities.

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Question 13

Identify and discuss the three classifications of the statement of cash flows.

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Question 14

Which of the following statements is correct in accordance with AASB 107 Statement of Cash Flows?
A) Cash repayments of amounts borrowed are classified under financing activities.
B) Cash proceeds from issuing equity instruments are classified under financing activities.
C) Cash payments to acquire property, plant and equipment are classified under investing activities.
D) Cash advances and loans made to other parties are classified under investing activities.

Accepted Answer

The answer of Which of the following statements is correct...

Question 15

Following are cash flow transactions for Cootamundra Ltd:
$\begin{array}{|l|l|}
\hline \text { I} & \text { Interest paid } \
\hline \text { II} & \text { Interest received } \
\hline \text { III } & \text { Dividends paid } \
\hline \mathrm{IV} & \text { Dividends received } \
\hline \mathrm{V} & \text { Purchase of property plant and equipment } \
\hline \mathrm{VI}&\text { Proceeds from issue of shares }\
\hline
\end{array}$
Which of the following combinations includes all transactions that may by classified under investing activities of Cootamundra Ltd that are in accordance with AASB 107 Statement of Cash Flows?
A) I, II, III, IV, V and VI
B) I, II, IV and V
C) III, IV and VI
D) I, II and V

Accepted Answer

Interest received and dividends received are classified as investing activities, as well as the purchase of property, plant, and equipment. Interest paid is typically classified as an operating activity, but it can be considered an investing activity depending on the context and accounting standards. However, in the context of AASB 107, dividends paid and proceeds from the issue of shares are not classified under investing activities; dividends paid are typically classified under financing activities, and proceeds from the issue of shares are definitely a financing activity.

Question 16

Discuss the terms 'cash' and 'cash equivalents' as they apply to a statement of cash flows.

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Question 17

Traditional financial ratios such as the current ratio or acid-test ratios have come in to question as it is argued that they do not monitor the organisation's:
A) profitability.
B) going concern.
C) liquidity.
D) wealth.

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Quiz 19: The Statement of Cash Flows

Discuss the potential limitations of the statement of cash flows.

Which of the following would not be an operating activity cash outflow?

Explain how the form and content of the statement of cash flow could change as a result of a joint project by the IASB and the US Financial Accounting Standards Board (FASB)investigating the presentation of financial statements.

Discuss the treatment of interest and dividends in accordance with AASB 107 Statement of Cash Flows.

It is currently argued that the presentation of the various financial statements lack:

Explain why AASB 107 requires disclosures to be made about non-cash financing and investing activities.

Walter (1987) claimed that 'one of the strongest antidotes to creative accounting is a requirement for statement of cash flows to have '.

'Cash flows from operations would seem to provide a reasonable guide to the ability of a firm to service debt'.Discuss.

Which of the following statements is not in accordance with AASB 107 Statement of Cash Flows?

Describe the application of AASB 107 to interest and dividends received.

Discuss the differences between the direct and indirect methods when reporting cash flows from operating activities.

Identify and discuss the three classifications of the statement of cash flows.

Which of the following statements is correct in accordance with AASB 107 Statement of Cash Flows?

Discuss the terms 'cash' and 'cash equivalents' as they apply to a statement of cash flows.

Traditional financial ratios such as the current ratio or acid-test ratios have come in to question as it is argued that they do not monitor the organisation's: