IAS 7 – Statement of Cash Flows

Objective of IAS 7

The objective of IAS 7 is to require the presentation of information about changes in an entity’s cash and cash equivalents over time through a statement of cash flows. This statement classifies cash flows for the period into operating, investing, and financing activities.

Basic Principle of IAS 7

All entities that prepare financial statements in accordance with IFRS are required to present a statement of cash flows.
[IAS 7.1]

The statement of cash flows analyzes changes in cash and cash equivalents during a period.

Cash and cash equivalents include:

• cash on hand and demand deposits,
• short-term, highly liquid financial investments that can be converted into a known amount of cash at any time and are subject to only an insignificant risk of change in value.

Investments are considered cash equivalents only if they have a remaining maturity of three months or less at the time of acquisition. Equity instruments are generally excluded, unless they constitute a cash equivalent from an economic perspective (e.g., preferred shares acquired within three months prior to their specified redemption date).
[IAS 7.7–8]

Presentation of the Statement of Cash Flows

The statement of cash flows must include cash flows for the period, classified by operating, investing, and financing activities.
[IAS 7.10]

Key Principles under IAS 7

• Operating activities are the entity’s principal revenue-generating activities that are not investing or financing activities. Operating cash flows therefore include cash receipts from customers and cash payments to suppliers and employees.
  [IAS 7.14]
• Investing activities relate to the acquisition and disposal of noncurrent assets and other investments that are not considered cash equivalents.
  [IAS 7.6]
• Financing activities are activities that change the entity’s equity and debt structure.
  [IAS 7.6]
• Interest received and paid, as well as dividends, may be classified as operating, investing, or financing cash flows, provided that the classification is consistent from period to period.
  [IAS 7.31]
• Cash flows from income taxes are generally classified as operating activities, unless they can be clearly attributed to investing or financing activities.
  [IAS 7.35]
• The direct method is recommended for operating cash flows; however, the indirect method is permitted.
  [IAS 7.18]

Direct Method

The direct method identifies each significant category of gross cash inflows and gross cash outflows:

Indirect Method

The indirect method adjusts the net income for the period to account for the effects of non-cash transactions:

Additional Provisions under IAS 7

• For the translation of cash flows in foreign currencies, the exchange rate at the time of the cash flow must be used.
  [IAS 7.25]
• Cash flows from foreign subsidiaries must be translated at the exchange rates in effect at the time of the cash flows.
  [IAS 7.26]
• The following applies to associates, joint ventures, and subsidiaries:
  • When applying the equity method or the cost method, only cash flows between the investor and the investee are to be reported.
  • When using proportionate consolidation, the investor’s proportionate share of cash flows must be included.
    [IAS 7.37]
• Aggregated cash flows from the acquisition and disposal of subsidiaries and business units must be presented separately and classified as investing activities.
  [IAS 7.39]
• Cash flows from investing and financing activities must generally be presented separately by major categories of cash inflows and outflows. A net presentation is permitted only in certain cases:
  [IAS 7.22–24]
  • Cash flows on behalf of customers (e.g., acceptance and repayment of demand deposits by banks),
  • items with high turnover, large amounts, and short terms (usually less than three months),
• Investing and financing activities that do not involve the use of cash are not to be reported in the statement of cash flows but must be disclosed separately in the financial statements.
  [IAS 7.43]
• Information about supplier financing arrangements must be disclosed so that users can assess the effects on liabilities, cash flows, and liquidity risks.
  [IAS 7.44F]
• The components of cash and cash equivalents must be disclosed and reconciled to the amounts in the balance sheet.
  [IAS 7.45]
• The amount of cash and cash equivalents that is not freely available to the Group must be disclosed, together with a note from management.
  [IAS 7.48]

Diese Übersicht dient der sachlichen Orientierung und ersetzt keine Rechts- oder Bilanzierungsberatung im Einzelfall. Rechtsstand: 2026