What’s New in Ind-AS Statement of Cash Flows

Introduction:

It has been long days we have not seen any significant vibration in presentation or disclosure in statement of cash flows. However, this time in financial reporting for period ended March 2018, we will see additional disclosure in Statement of Cash Flows of Ind-AS compliant companies. One year back, the Ministry of Corporate Affairs (MCA) has issued Companies (Indian Accounting Standards) (Amendment) Rules, 2017 on 17^th March 2017. This Amendment Rule brought amendments to Ind-AS 7 “Statement of Cash flows” and Ind-AS 102 “Share Based Payments”. These amendments are consistent with amendments made by International Accounting Standards Board (IASB) in corresponding International Financial Reporting Standards (IFRSs).

Ind-AS compliant companies are required to apply these amendments for annual period beginning on or after 1^st April 2017. Accordingly, Ind-AS compliant companies in India whose financial statements will publish for March 2018 are required to adopt these amendments. This article deals with amendment to Ind-AS 7 “Statement of Cash Flows” in details.

Additional Disclosure in Statement of Cash Flows:

This amendment introduces additional disclosures which will provide more use-full information on cash flows from financing activity to the users of Financial Statement. The amendment requires Ind-AS complaint companies to provide disclosure which users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes.

Accordingly, now the Ind-AS compliant companies need to disclose the following changes in liabilities arising from financing activities:

(a) changes from financing cash flows;

(b) changes arising from obtaining or losing control of subsidiaries or other businesses;

(c) the effect of changes in foreign exchange rates;

(d) changes in fair values; and

(e) other changes.

Points to Ponder

1. The way this additional disclosure to be made: –

This disclosure can be made by providing a reconciliation between the opening and closing balances in the balance sheet for liabilities arising from financing activities, including the changes identified in paragraph mentioned above. Where an entity discloses such a reconciliation, it shall provide sufficient information to enable users of the financial statements to link items included in the reconciliation to the balance sheet and the statement of cash flows. An entity may choose to disclose by any other ways instead of reconciliation from opening to closing balances.

2. Comparative Information Disclosure: –

Paragraph 60 of Amended Ind-AS 7 states that “when the entity first applies these amendments, it is not required to provide comparative information for preceding periods”. Hence, disclosure of comparative information is not required for the first year of adoption, but it should be made for subsequent on wards.

3. Nature of Cash flows covered under the disclosure requirement:

The disclosure requirement is for liabilities for which cash flows were, or future cash flows will be, classified in the statement of cash flows as cash flows from financing activities. Hence, scope is wider and its applicability should not be restricted to only borrowings or debt instruments.

4. Disclosure for Financial Assets used to manage finance activities

This disclosure requirement is also applicable for financial assets used to mange an entity’s finance activities, if cash flows from those financial assets were, or future cash flows will be, included in cash flows from financing activities. Examples of such financial assets are assets that hedge liabilities arising from financing activities.

5. Disclosure in the Interim Financial Statements:

This amendment is applicable for financial year beginning on or after 1^st April 2017. Accordingly, it may be interpreted that the amendment is applicable for Financial year ending 31^st March 2018 on wards not for interim financial statements. Further this disclosure requirement is not applicable for Financial statements prepared for the year ending 31^st December 2017.

6. Illustrative Format for disclosure: –

Note No XX:

The following table disclose below changes in liabilities arising from financing activities, including both cash and non-cash changes.

• Other changes may be changes on account of interest accruals.

Conclusion:

This additional disclosure in Statement of Cash Flows will bring more transparency in reporting of cash flows from financing activity.

(The author can be reached at apjsrb@gmail.com)