Cash Flow Statement Guide

Cash Flow Statements 21
p
ay dividends, repay loans an
d
make new investments without recourse t
o
external sources of financing. Information about the specific components o
f
historical operating cash flows is useful, in conjunction with other information,
in forecasting future operating cash flows.
12. Cash flows fro
m
operating activities a
r
e primarily derive
d
from the
p
rincipal revenue-producing activities of the enterprise. Therefore
,
they generally result from the transactions and other events that ente
r
into the determination of net profit or loss. Examples of cash flows fro
m
operating activities are:
(a) cash receipts from the sale of goods and the rendering of services;
(b) cash receipts from royalties, fees, commissions and other revenue;
(c) cash payments to suppliers for goods and services;
(d) cash payments to and on behalf of employees;
(e) cash receipts and cash payments of an insurance enterprise fo
r
premiums and claims, annuities and other policy benefits;
(f) cash payments or refunds of income taxes unless they can
b
e
specifically identified with financing and investing activities; and
(g) cash receipts and payments relating to futures contracts, forwar
d
contracts, option contracts and swap contracts when the contract
s
are held for dealing or trading purposes.
13. Some transactions, such as the sale of an ite
m
of plant, may give rise to
a gain or loss which is included in the determination of net profit or loss
.
However, the cash flows relating to such transactions are cash flows fro
m
investi
n
g
activities.
14. An enterprise may hold securities and loans for dealing or trading
p
urposes, in which case they are similar to inventory acquired specificall
y
for resale. Therefore, cash flows arising from the purchase and sale of dealing
or trading securities are classified as operating activities. Similarly, cas
h
advances and loans made by financial enterprises are usually classified a
s
operating activities since they relate to the main revenue-producing activit
y
of that enterprise.
Investin
g
Activities
15. The separate disclosure of cash flows arising from investing activities
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