1. · 1 CORPORATE FINANCIAL REPORTING 23 – The Cash Flow Statement Dilutive Securities and EPS

2. · 2 THE CASH FLOW STATEMENT (FAS 95 or ASC 230) Operating activitiesxxxx Investing activitiesxxxx Financing activitiesxxxx Increase/decrease in cashxxxx Cash, beginning of year xxx Cash, end of the yearxxxx

3. · 3 THE CASH FLOW STATEMENT Purpose of the CFS: To provide information about a company’s cash receipts and cash payments during a period - organized in a rational manner.

4. · 4 THE CASH FLOW STATEMENT Operating activities ◊ normal day-to-day income producing activities (including buying/selling Trading Securities) Investing activities ◊ acquiring/disposing of non-current assets (including buying/selling Securities Available For Sale) & ◊ lending and being repaid the principal amount loaned Financing activities ◊ borrowing and repaying the principal amount borrowed & ◊ all cash transactions with shareholders

5. · 5 THE CASH FLOW STATEMENT Suppose you saw the following under ASSETS on a company’s balance sheet: (in $ 000) 2013 2012 Land 10,000 4,000 and under LIABILITIES there were no liabilities for a land purchase.

6. · 6 THE CASH FLOW STATEMENT Suppose you saw the following under ASSETS on a company’s balance sheet: (in $ 000) 2013 2012 Land 10,000 4,000 and under LIABILITIES there was: 2013 2012 Mortgage payable for land 5,000 -0-

7. · 7 THE CASH FLOW STATEMENT Suppose you saw the following under ASSETS on a company’s balance sheet: (in $ 000) 2013 2012 Land 10,000 24,000 And on the 2013 financial statements there was no mention of a land impairment loss.

8. · 8 THE CASH FLOW STATEMENT Suppose you saw the following under ASSETS on a company’s balance sheet: (in $ 000) 2013 2012 Land 10,000 24,000 Nothing about a receivable from sale of land. And on the 2013 income statement you saw Gain on land sale 5,000

9. · 9 THE CASH FLOW STATEMENT Suppose you saw the following under ASSETS on a company’s balance sheet: (in $ 000) 2013 2012 Land 10,000 24,000 Mortgage receivable-land 8,000 0 And on the 2013 income statement you saw Gain on land sale 5,000

10. · 10 THE CASH FLOW STATEMENT Suppose you saw the following under ASSETS on a company’s balance sheet: (in $ 000) 2013 2012 Land 10,000 24,000 And on the 2013 income statement you saw Land impairment loss 14,000

11. · 11 THE CASH FLOW STATEMENT Suppose you saw the following under OWNERS’ EQUITY on a company’s balance sheet: (in $ 000) 2013 2012 Capital stock 10,000 7,000 Additional paid in capital 14,000 9,000

12. · 12 THE CASH FLOW STATEMENT For the most part, that is the approach companies take to prepare the Investing Activities and the Financial Activities parts of their cash flow statements - they compare balances on the balance sheet.

13. · 13 THE CASH FLOW STATEMENT But for Operating Activities, which is based, in part, on the income statement, companies have a choice: the direct method or the indirect method, both give you the same answer, using different approaches.