Statement of Cash Flows Essay
Cash is defined by IFRS as cash on hand and demand deposits and cash equivalents as short term, highly liquid, readily convertible to known amounts of cash subject to insignificant risks of changes in value. An investment qualifies as a cash equivalent only when it has a maturity of three months or less from its’ acquisition date. Under U.S. GAAP the definition of cash and cash equivalents is similar to that of IFRS. The difference lies in their cash management styles. Under IFRS bank overdrafts are included as a component of cash and cash equivalents while under U.S. GAAP bank overdrafts are included in liabilities and excluded from cash equivalents. Under U.S. GAAP changes in overdrafts are considered a financing activity while under IFRS bank balances fluctuates from being positive to overdrawn.
Cash flows from investing and financing activities are reported gross by major class of cash receipts and major class of cash payments under IFRS. The following are exceptions and are reported on a net basis: cash receipts