MASB5 Cash Flow Statements Pg3
MASB5 Cash Flow Statements Pg3
MASB5 Cash Flow Statements Pg3
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1. An enterprise should report cash flows from operating activities using either:
1. the direct method, whereby major classes of gross cash receipts and gross cash payments are disclosed; or 2. the indirect method, whereby net profit or loss is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments, and items of income or expense associated with investing or financing cash flows.
1. Enterprises are encouraged to report cash flows from operating activities using the direct method. The direct method provides information which may be useful in estimating future cash flows and which is not available under the indirect method. Under the direct method, information about major classes of gross cash receipts and gross cash payments may be obtained either:
1. from the accounting records of the enterprise; or 2. by adjusting sales, cost of sales (interest and similar income and interest expense and similar charges for a financial institution) and other items in the income statements for:
1. changes during the period in inventories and operating receivables and payables; 2. other non-cash items; and 3. other items for which the cash effects are investing or financing cash flows. Enterprises that use the direct method are encouraged to provide a reconciliation of cash flows from operations with the net profit or loss for the period. 1. Under the indirect method, the net cash flow from operating activities is determined by adjusting net profit or loss for the effects of: 1. changes during the period in inventories and operating receivables and payables; 2. non-cash items such as depreciation, provisions, deferred taxes, unrealised foreign currency gains and losses, undistributed profits of associates, and minority interests; and 3. all other items for which the cash effects are investing or financing cash flows. Alternatively, the net cash flow from operating activities may be presented under the indirect method by showing the revenues and expenses disclosed in the income statement and the changes during the period in inventories and operating receivables and payables.
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1. Cash flows arising from each of the following activities of a financial institution may be reported on a net basis:
1. cash receipts and payments for the acceptance and repayment of deposits with a fixed maturity date; 2. the placement of deposits with and withdrawal of deposits from other financial institutions; and 3. cash advances and loans made to customers and the repayment of those advances and loans.
1. Cash flows arising from transactions in a foreign currency should be recorded in an enterprise's reporting currency by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the cash flow. 2. The cash flows of a foreign subsidiary should be translated at the exchange rates between the reporting currency and the foreign currency at the dates of the cash flows. 3. Cash flows denominated in a foreign currency are reported in a manner consistent with MASB 6, The Effects of Changes in Foreign Exchange Rates. This permits the use of an exchange rate that approximates the actual rate. For example, a weighted average exchange rate for a period may be used for recording foreign currency transactions or the translation of the cash flows of a foreign subsidiary. However, MASB 6, The Effect of Changes in Foreign Exchange Rates, does not permit use of the exchange rate at the balance sheet date when translating the cash flows of a foreign subsidiary. 4. Unrealised gains and losses arising from changes in foreign currency exchange rates are not cash flows. However, the effect of exchange rate changes on cash and cash equivalents held or due in a foreign currency is reported in the cash flow statement in order to reconcile cash and cash equivalents at the beginning and the end of the period. This amount is presented separately from cash flows from operating, investing and financing activities and includes the differences, if any, had those cash flows been reported at end of period exchange rates.
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Malaysian Accounting Standards Board Suite 5.02, Level 5, Wisma UOA Pantai, 11 Jalan Pantai Jaya, 59200 Kuala Lumpur. Tel : 603-2240 9200 Fax : 603-2240 9300 Email : [email protected] Financial Reporting Foundation and Malaysian Accounting Standards Board 2010. All Rights Reserved.
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