F2 Consolidated Statement of Cashflow

Operating activities,
Investing activities,
Financing activities.

To explain the movement of cash and cash equivalents during a period, showing where cash came from and how it was used.

The indirect method.

Start with net profit before interest and tax (operating profit).

Depreciation, amortization, impairment, and loss on disposal of assets.

Increase in receivables or inventory: subtract from cash

Decrease in receivables or inventory: add to cash

Increase in payables: add to cash

Decrease in payables: subtract from cash

Purchase and sale of property, plant, and equipment (PPE), and other long-term investments.

Issue or repayment of shares and loans, and payment of dividends.

Because they affect profit but do not involve actual cash movement.

Opening tax payable + tax expense (from P&L) – closing tax payable = cash paid for tax

opening balance + charges for year - closing balance

Cash paid to purchase PPE or investments: show as cash outflow

Cash received from sale of PPE or investments: show as cash inflow

Use actual cash amounts, not book values.

Cash received from issuing shares or loans: add as inflow

Cash paid to repay loans or pay dividends: subtract as outflow

Use the movement in share capital, share premium, and loan balances.

In the investing section.

In the financing section.

Note NCI at the start of the year.
Add: NCI’s share of profit for the year.
Add/Subtract: Any changes in ownership (acquisitions/disposals)—if none, skip this step.
Subtract: NCI at the end of the year.
The difference = Dividend paid to NCI. (Expressed as: Start NCI + NCI Profit ± Ownership changes – End NCI = Dividend Paid)
Placement in financials: Cash outflows for dividends paid to NCI appear under the “Financing activities” section of the cash flow statement.

Find the investment in the associate at the start and end of the year.
Calculate increases from the share of profit and other comprehensive income (OCI).
The formula:  Dividend received = (Start of year investment + Share of profit + Share of OCI) - End of year investment
The result is the cash dividend received (recorded in the investing section of the cash flow statement).
Journal entry: Debit bank, Credit investment in associate.

The direct impact is cash paid out to acquire or cash received from disposing of a subsidiary, recorded in the investing section. The net effect is the cash outflow or inflow minus any cash bank deposits held by the subsidiary at the time of acquisition or disposal.

Net cash effect = Cash paid to acquire the subsidiary minus cash or bank balance held by the subsidiary at acquisition.

The indirect impact involves ensuring that the consolidated cash flow statement does not double count the subsidiary’s cash flows or asset/liability movements due to acquisition/disposal.

To avoid double counting: part of the inventory increase may be from acquiring a subsidiary with existing inventory. Only the increase not from acquisition affects operating cash flow.

Adjust the inventory movement to exclude the inventory acquired with the new subsidiary. Only the net increase (excluding that from acquisition) appears as a cash outflow in the operating section.

Non-cash acquisitions (like issuing shares) are not reflected as cash flows in the cash flow statement.

They are recorded in the investing section. Dividend income from associates or joint ventures is also shown in this section unless proportionately consolidated (rare).

Calculate the goodwill at acquisition, compare it to the C/F goodwill, if it matches no adjustment is needed, if it is less you will need to add back the difference in the cash from operating activites section

calcualte the difference from prev year to current year as usual but deduct the balance of the acquired subsidiary from the answer to get the total cash adjustment for operating activities

Take the amount paid (only the cash) and deduct the cash in bank of the subsidiary

Sum the share capital and share premium for this year and last year; subtract previous year from current year to get the increase. Then subtract any non-cash considerations (e.g., shares issued to subsidiary shareholders).

Add the profit attributable to the parent to last years retained earnings. If it equals your retained earnings carried forward then no adjustment to investing activites is needed, if it does not then a divident was paid and you need to subtract the divident in investing activities

Deduct the dividend from prev year investment in associate figure. Then deduct the result from the current year investment in associate figure to get the share of profit as the balancing figure