IFRS 7 Financial Instruments: Disclosures Safin Ilyas

IFRS represent the registration system functioning at the international level, and their feature is that they contain at the same time and conceptual bases of drawing up of the reporting, and actually standards of financial statements. Recommendatory character of standards as is impossible more corresponds to market economy: all enterprises, wishing to come into the international economic contacts to capture attention of users «without borders», perfectly realize need of drawing up of financial statements according to IFRS, and any directions here, in principle, it is not required. As IFRS became international language of accountants and economists, their knowledge becomes a condition at first information, and then and economic communication (interaction) at world level. Concept of IFRS

The report on cash flow — the report of the company on sources of money and their use in this temporary period. This report directly or indirectly reflects monetary receipts of the company with classification by the main sources and its monetary payments with classification by the main directions of use during the period. The report gives an overall picture of production results, short-term liquidity, long-term solvency and allows to carry out with bigger ease the financial analysis of the company IFRS (IAS 7) (Cash Flow Statements)

This report is necessary both to managers, and external users who on its indicators can see the real income and expenses, and also to learn: Volume and sources of receiving money and direction of their use. Ability of the company as a result of the activity to provide excess of receipts of money over payments. Ability of the company to carry out of the obligations. Information on sufficiency of money for conducting activity. Extent of independent ensuring investment requirements at the expense of internal sources. The difference reasons between size of the received profit and amount of money Purpose and scope of application

[Example 1]  Cash flow as a result of operating activities  Cash flow as a result of investment activity (1 000)  Cash flow as a result of financial activity (2 000)  Pure cash flow Simplified version of the report on cash flow

Below four main groups of factors used in the financial analysis of the report on cash flow are considered:  Factors of a monetary covering;  Factors of a monetary covering of profit;  Factors of a monetary covering of capital expenditure;  Factors of profitability of cash flows. Financial analysis

By drawing up of the report divide inflow and outflow of cash on production (operational or current), financial and investment activity of the company: operating activities — a main type of activity, and also the other activity creating receipt and an expenditure of funds of the company (except for financial and investment activity) ; investment activity — a kind of activity, connected with acquisition, creation and sale of non-current assets (fixed assets, intangible assets) and the other investments which have not been included in definition of money and their equivalents ; financial activity — a kind of activity which leads to changes in the size and structure of the capital and debt funds of the company. As a rule, such activity is connected with attraction and return of the credits necessary for financing of operating and investment activities Method of drawing up

 The direct method provides disclosure of information on main types of gross monetary receipts and payments  Information for drawing up of the report on cash flow can be received from company accounts by a way of correction of sales, cost of sales and other articles recognized as a part of profit or a loss Direct method

IFRS (IAS) 7 welcome disclosure of additional information which can be useful to users to understanding of a financial position and liquidity of the company:  size of unused proceeds of credit (available credit limit) which can be provided for financing of operating activities in the future, and also for repayment of the main amount of debt with the indication of any restrictions on attraction of these means;  cash flow in a cut of the operating, investment and financial activities, connected with participation in joint venture on a method of proportional consolidation;  total amount of the capital expenditure necessary for increase in operational capacities, separately from the sums necessary for maintenance of the current productivity Disclosure

 consists in establishment of differences between an indicator of net profit (loss) of the reporting period, created on a method of charge and presented in the profit and loss report, and an indicator of pure money on operating activities (an increment of money and their equivalents during the period), calculated on a cash method on the basis of data of the balance sheet (a difference between money on the end and the beginning of the reporting period). Indirect method