The Statement of Cash Flows is one of three financial statements required under both Canadian GAAP and IFRS, and essentially provides users with information regarding how the company obtained and used cash during the period.
The Statement of Cash Flows is relatively consistent between Canadian GAAP and IFRS.
- Both segregate cash flows into either operating investing or financing activities during the period.
- Both allow a choice between using the “Direct” or “Indirect method”.
However there may be some possible differences in the classification of cash flow activities. For example, under IFRS there is an Accounting choice that can be made for the classification of Interest and Dividends received and paid in the Statement of Cash Flows. Interest and Dividends can each be classified as either cash flows arising from operating, investing or financing activities, provided that it is done in a consistent manner.
However, under Canadian GAAP, if Interest or Dividends is recognized in the Income Statement, then this must be reported as cash flow from operating activities.
In all other respects, the Statement of Cash Flows under IFRS are quite similar to Canadian GAAP, but please refer IAS 7 Paragraph 7 for specific IFRS requirements pertaining to Statement of Cash Flows as there are some other minor differences. For instance, IAS 7 does not deal with cash flow per share information, and does not deal with classification of amortization of premiums and discounts on interest-bearing instruments whereas Canadian GAAP Section 1540 has specific guidance on both of these items.
I hope this helps. This is one of a series of blogs that is meant to convey information relating to Canada’s transition from Canadian GAAP to IFRS.
For further information, please refer to the ongoing series of IFRS blogs on the Edelkoort Smethurst Schein CPA’s LLP web-site and please remember to contact your CGA or other accounting professional for further guidance.