Question

The statement of cash flows for the year ended December 31, 2021, for Bronco Metals is presented below.

 

Required:
Prepare the statement of cash flows assuming that Bronco prepares its financial statements according to International Financial Reporting Standards. Where IFRS allows flexibility, use the classification used most often in IFRS financial statements.

Answer 1

Consistent with U.S. GAAP, international standards also require a statement of cash flows. Consistent with U.S. GAAP, cash flows are classified as operating, investing, or financing. However, the U.S. standard designates cash outflows for interest payments and cash inflows from interest and dividends received as operating cash flows. Dividends paid to shareholders are classified as financing cash flows.

 

IAS No. 7, on the other hand, allows more flexibility. Companies can report interest and dividends paid as either operating or financing cash flows and interest and dividends received as either operating or investing cash flows. Interest and dividend payments usually are reported as financing activities. Interest and dividends received normally are classified as investing activities.

 

Accordingly, the statement of cash flows prepared according to IFRS mostly likely would be presented as follows (differences from U.S. GAAP in italics):

 

               BRONCO METALS

          Statement of Cash Flows

For the Year Ended December 31, 2021

 

Cash flows from operating activities:

          Collections from customers                  $ 353,000

          Purchase of inventory                            (186,000)

          Payment of operating expenses             (67,000)

Net cash flows from operating activities                        $100,000

 

Cash flows from investing activities:

          Interest on notes receivable                          4,000

          Dividends received from investments        2,400

          Collection of notes receivable                  100,000 

          Purchase of equipment                           (154,000)

Net cash flows from investing activities                           (47,600)

 

Cash flows from financing activities:

          Payment of interest on notes payable    (8,000)        

          Issuance of common stock                      200,000 

          Dividends paid to shareholders              (40,000)

           Net cash flows from financing activities              152,000

Net increase in cash                                                           204,400 

 

Cash and cash equivalents, January 1                              28,600 

 

Cash and cash equivalents, December 31                   $233,000 

Cash and cash equivalents, December 31                   $233,000