CONSOLIDATED

STATEMENT OF CASH
FLOW

LEARNING OBJECTIVES

To explain the rationale of cash flow

reporting
To identify the requirements of statutes
and accounting standard on Statement of
Cash Flows including related transactions
for the group
To prepare and present the group
Statement of Cash Flows- Acquisitions and
disposals of subsidiaries and treatment of
associates and subsidiaries
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INTRODUCTION
Why preparing STATEMENT OF CASH FLOW?
1. Provide information about an entitys cash
receipt and cash payment during a period.
2. Provide information about its operating,
investing and financing activities an entity
during a period.
It provides answers for the following questions:
1. Where did the cash come from during the
period?
2. What was the cash used for during the
period?
3. What was the change in the cash balance
during the period?

INTRODUCTION
By answering the questions, company will
get the some benefit such as;
1. Enables users to evaluate the changes in
net assets of company
2. Assessing the ability of company to
generate cash and cash equivalent
3. Enhances the comparability of the
reporting of operating performance by
different company.
4

INTRODUCTION..
The SCF is usually prepared using
cash and cash equivalents as its
basis.
Cash equivalents are short-term,
highly liquid investments that are
both:
1) readily convertible to known amounts of cash
2) so near to their maturity that their market
value is relatively insensitive to changes in
interest rates.

CONSOLIDATED
STATEMENT OF CASH FLOW
(CSCF)
Using the same MFRS 107 Statement of
Cash Flow as a guideline
The process to prepare this statement is
similar for an individual companies.
CSCF should report cash flows during the
period classified by operating, investing,
and financing activities (MFRS 107).

CONSOLIDATED
STATEMENT OF CASH FLOW

i. Operating Activities
Include cash effects of transactions that create
revenues and expenses. Key indicator- internally
generated CF from operations. Include into the
determination of net income. Examples;
Cash receipts from sale of goods and rendering of
services
Cash receipts from royalties, fees, commissions
and other revenues.
Cash payments to suppliers for goods and services
Cash payments to and on behalf of the employee.
Cash receipts and payment of insurance for
premiums and claim and other policy benefits.
* interest element may be classified as an operating
activity

CONSOLIDATED
STATEMENT OF CASH FLOW
2 methods for operating activities:
1.Direct method

- major classes of gross receipts and gross payments.

- preferred by MFRS 107

2.Indirect method
-. Profit /loss before tax in income statement is
adjusted with

- non-cash nature (depreciation, provisions, deferred

taxes , profits retained in associates and NCI)
- changes in stock, debtors and creditors

- focuses on the differences between net income and

net cash flow from operating activities.
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CONSOLIDATED
STATEMENT OF CASH FLOW
ii. Investing Activities

Cash flows represent the extent to which

expenditures (long term assets) have been made
for resources intended to generate future income
and cash flows. Examples:
Cash payments to acquire and dispose property,
plant and equipment, intangibles and long-term
assets
Cash receipts from sales of property, plant and
equipment, intangibles and long-term assets
Cash payments to acquire and dispose equity or
debt instruments of other enterprises and interests
in joint ventures
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CONSOLIDATED
STATEMENT OF CASH FLOW
iii. Financing Activities

Predicting claims on future cash flows by

providers of capital to the enterprise (changes
in the size and composition of the equity
capital and borrowings of the enterprise).
Involves long term liability and equity in
balance sheets

10

CONSOLIDATED
STATEMENT OF CASH FLOW
Financing activities - Examples:
Cash proceeds from issuing shares of other equity
instruments
Cash payments to owners to buyback or redeem
the enterprises shares
Cash proceeds from issuing debentures, loans,
notes, bonds and other short/long term borrowing
Cash repayment of amount borrowed

11

CONSOLIDATED
STATEMENT OF CASH FLOW
Investing activities and Financing
activities
Major classes of gross cash receipts and gross
cash payments arising from investing and
financing activities:
Investment in subsidiaries, associates and joint
ventures
Acquisitions and disposals of subsidiaries and other
business units
The aggregate cash flows arising from acquisitions
and from disposals of subsidiaries or
Other business units should be presented separately
and classified as investing activities
12

CONSOLIDATED
STATEMENT OF CASH FLOW
- In order to prepare the CSCF, the items from
consolidated balance sheet (CBS) and
consolidated income statement (CIS) need to be
used.
- Not to consolidate Statement of Cash flows by
individual companies. However, if there is no
other way, then the groups internal cash
transactions must be eliminated to avoid double
counting of cash.

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CONSOLIDATED
STATEMENT OF CASH FLOW (CSCF)
CSCF VS SCF
There are few extra items to be
included in the CSCF.
1. Non-controlling Interest
2. Investment in Associates
3. Acquisition of subsidiaries
4. Disposal of subsidiaries
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CONSOLIDATED
STATEMENT OF CASH FLOW
1) Non-controlling Interest
-

NCI account balance will only change due to:

(a)
NCI in the current years profit of a subsidiary
(b) Dividends paid by a subsidiary to the minority
shareholders.

- However, only transaction which effects the Cash

flow of the group will be included in the CSCF.
o For transaction (a), the proportion of current
years profit in the subsidiary company will have
no effect in CSCF because it has nothing to do
with cash or cash equivalent.
o For transaction (b), it will result in outflow of cash.
Then, it will be included in CSCF.
15

Illustration 1:
A Bhd holds 70% of B Bhd.Below are the PARTIAL
CSCI, CSCE and SCI of B Bhd and SCE of B Bhd for
the YE 31 Dec. 2007:
CIS (RM000) B Bhd (RM000)
Profit before Tax 625
125
Tax
187.5
37.5
Profit After Tax 437.5
87.5
Attributable to:
S/holders
411.25
NCI
26.25
437.50
16

Illustration 1
CIS (RM000)

B Bhd (RM000)

Beg. Retained Profit

625
Profit for the year
411.25
Dividend
(125)
(12.5)
Ending Retained Profit 911.25

375
87.5
450

From the above information, it will reflect the

CSCF as follows;

17

Illustration 1
Indirect Method:
A Bhd & Group
CSCF (Partial)
FYE 31 Dec 2007
RM000
Cash flow from operating activities:
Profit before tax 625
Cash Flow from financing activities:
Dividend paid to NCI (3.75)
*For this kind of transaction, the effect will same for any
method, either direct / indirect just same treatment.

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CONSOLIDATED
STATEMENT OF CASH FLOW
2) Investment in Associates
The investment in associate account balance
will only change due to:
(a) Groups share of the current year associated
profit
(b) Dividends received from the associated
However, only transaction which effects the
Cash flow of the group will be included in the
CSCF.
()For transaction (a), the proportion of current
year associates profit will have no effect in
CSCF because it has nothing to do with cash
or cash equivalent.
()For transaction (b), it will result in inflow of

19

Illustration 2
A Bhd holds 70% and of B and 20% of C Bhd.
Below are the PARTIAL CIS, CSCE and IS of C
Bhd and SCE of C Bhd for the YE 31 Dec. 2007:
CIS (RM000)
C Bhd (RM000)
Operating profit 625 125
Share of assoc. Profit 17.5 .
Profit before Tax 642.5 125
Tax (192.5)
(37.5)
Profit after tax450.00 87.5
Attributable to:
S/holders 423.75
NCI 26.25
450.00
20

Illustration 2
CIS (RM000) C Bhd (RM000)
Beg. Retained Profit 750 250
Profit before the year 423.75 87.5
Dividend (125) (12.5)
End. Retained Profit 1,048.75 325
From the above information, it will reflect the CSCF
as follows;

21

Illustration 2
Indirect Method:
A Bhd & Group
CSCF (Partial) FYE 31 Dec 2007
RM000
Cash flow from operating activities:
Profit before tax 642.5
Less: non cash item
Share of associated profit

(17.5)

Cash Flow from financing activities:

Dividend received frm associate

2.5

* we need to lessen the amount of profit b4 tax with the

appropriation of the associates profit amount because the
profit was not in the cash or cash equivalent form.
* Dividend receive from associate will increase the groups
cash, thus it will add up in the CSCF.

22

Illustration 2
Direct Method:
A Bhd & Group
CSCF (Partial)
FYE 31 Dec 2007
RM000
Cash Flow from investing activities:
Dividend received frm associate 2.5

* By using direct method, you do not have to be bothered by

the appropriation of associate profit in the profit before tax
amount.
* You can directly add the amount of dividend received from
associate under the cash flow from operating/ investing
activities.
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CONSOLIDATED
STATEMENT OF CASH FLOW
3) Acquisition of Subsidiary
When a company acquires other company,
automatically the groups total assets and total
liabilities will increase. But the groups cash will
decrease
MFRS 107 Para 39 the aggregate cash flow
arising from acquisition of subsidiary companies
should be presented separately and classified as
cash flow from investing activities.
MFRS 107 Para 42 - aggregate amount of cash
paid to acquire the subsidiary company should be
reported in the consolidated Statement of Cash
Flow as net of cash and cash equivalent
acquired.

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3) Acquisition of Subsidiary
MFRS 107 requires additional relevant information to be
presented in detail.

a) Total purchase consideration

b) The portion of purchase consideration
discharged by means of cash and cash
equivalent.
c) the amount of cash and cash equivalent in the
subsidiary acquired
d) the amount of other assets and liabilities in the
subsidiary acquired, and summarized by major
categories.
* The aim for this presentation is to distinguish the cash flow
arising from the acquisition of the subsidiary from the cash
flow from other activities. (operating, investing, financing).
25

Illustration 3
A Bhd acquired another subsidiary, D Bhd for
about 80% with cash purchased consideration of
RM125,000 during year 2007. At the date of
acquisition, D Bhds balance sheet as shown
below:
RM000
RM000
Share Capital
125 Building
100
Retained Profit
25 Equipment
87.5
Trade creditors
62.5
Inventory
50
Dividend payable
37.5 Cash
12.5
250.0
250.0
26

Illustration 3
As required by MFRS 107 Para 42, the value to be disclosed would be
RM112,500. The amount was derived from the calculation shown;

Total Assets RM250,000

Less:
Total Liabilities
Trade creditors RM62,500
Div. payable RM37,500
(RM100,000)
Net Assets
RM150,000
Less:
NCI (RM 30,000)
RM120,000
Goodwill RM
5,000
Thus; Cash purchase RM125,000
Less:
Cash available in D Bhd RM 12,500
Cash flow on acquisition RM112,500
27

Illustration 3
This RM112,500 is consider as net of cash acquired under
MFRS 107 Para 42 and will be presented in the cash flow as
below:
Indirect Method/ Direct Method:
A Bhd & Group
CSCF (Partial)
FYE 31 Dec 2007
RM000
Cash flow from investing activities:
Acquisition of subsidiary (112.5)
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CONSOLIDATED
STATEMENT OF CASH FLOW
4) Disposal of Subsidiary

When a company dispose its subsidiary

company, automatically the groups total assets
and total liabilities will decrease. But the groups
cash will increase.
Para 39 the aggregate cash flow arising from
the disposal of subsidiary companies should be
presented separately and classified as cash flow
from investing activities.
Para 42 aggregate amount of cash received as
sale consideration should be reported in the
consolidated Statement of Cash Flow as net of
cash and cash equivalent disposed of.
29

4) Disposal of Subsidiary
- MFRS 107 requires additional relevant information to
be presented in detail.
a) Total disposal price
b) The portion of disposal price received in cash and cash
equivalent.
c) the amount of cash and cash equivalent in the
subsidiary disposed of; and
d) the amount of other assets and liabilities in the
subsidiary disposed of, and summarized by major
categories.
* The aim for this presentation is to distinguish the cash flow
arising from the disposal of the subsidiary from the cash
flow from other activities. (operating, investing, financing).
30

Illustration 4
A Bhd disposed one of its subsidiaries, E Bhd during
year 2007. A bhd held 80% of E Bhd. Cash
consideration of RM125,000 was agreed for
disposal. At the date of acquisition, E Bhds balance
sheet as shown below:
RM000
RM000
Share Capital
125.0 Building
100.0
Retained Profit
25.0 Equipment
87.5
Trade creditors
62.5 Inventory
50.0
Dividend payable
37.5 Cash
12.5
250.0

250.0

31

Illustration 4
As required by MFRS 107 Para 42, the value to be disclosed
would be RM112,500. The amount was derived from the
calculation shown:
Total Assets RM250,000
Less:
Total Liabilities
Trade creditors RM62,500
Div. payable RM37,500
(RM100,000)
Net Assets RM150,000
Less:
NCI (RM30,000)
RM120,000
Profit from disposal RM
5,000
Thus; Disposal price RM125,000
Less:
Cash available in E BhdRM 12,500
Cash flow on disposal RM112,500
32

Illustration 4
This RM112,500 is consider as net of cash
disposed of under MFRS 107 Para 42 and will
be presented in the cash flow as below:

Indirect Method/ Direct Method:

A Bhd & Group
CSCF (Partial)FYE 31 Dec 2007
RM000
Cash flow from investing activities:
Disposal of subsidiary
112.5

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End of the Chapter

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