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AASB 107 - Cash Flow Statements

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Summary 
Developments, Key Differences & History 
Compared to IFRS 
Interpretations 
Rejection Notices 
Questions & Answers 
Articles 
AASB website 

 
IFRIC Rejections and Guidance  
  1. March 2008 - Classification of expenditures 
  2. August 2005 - Value added tax 
  3. August 2005 - Value added tax 
  4. April 2003 - Classification of treasury shares in the consolidated cash flow statement
 
1. March 2008 - Classification of expenditures 
 
Issue:  
 
The IFRIC received a request for guidance on the treatment of some types of expenditure in the statement of cash flows. In practice some entities classify expenditures that are not recognised as assets under IFRSs as cash flows from operating activities while others classify them as part of investing activities. Examples of such expenditures are those for exploration and evaluation activities (which can be recognised, according to the applicable standard, as an asset or an expense). Advertising and promotional activities, staff training and research and development could also raise the same issue.  
 
IFRIC Decision: 
 
The IFRIC concluded that the issue could be best resolved by referring it to the Board with a recommendation that IAS 7 should be amended to make explicit that only an expenditure that results in a recognised asset can be classified as a cash flow from investing activity. The IFRIC therefore decided not to add the issue to its agenda. 
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2. August 2005 - Value added tax 
 
Issue:  
 
Whether cash flows reported in accordance with IAS 7 Cash Flow Statements should be measured as inclusive or exclusive of value added tax (VAT). There was evidence that different practices will emerge, the differences being most marked for entities that adopt the direct method of reporting cash flows.  
 
IFRIC Decision: 
 
IAS 7 does not explicitly address the treatment of VAT. The IFRIC noted that it would be appropriate in complying with IAS 1 Presentation of Financial Statements for entities to disclose whether they present their gross cash flows as inclusive or exclusive of VAT.  
 
The IFRIC decided that it should not develop an Interpretation on this topic, because while different practices may emerge, they are not expected to be widespread.  
 
The IFRIC will recommend to the IASB that the treatment of VAT should be considered as part of the review of IAS 7 being carried out within the project on performance reporting.  
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3. April 2003 - Classification of treasury shares in the consolidated cash flow statement 
 
Issue:  
 
Four scenarios were considered concerning the classification of treasury shares in the consolidated cash flow statement, under IAS 7:
  • a subsidiary purchases (sells) shares of its parent; 
  • the parent entity purchases (sells) shares of its subsidiary from (to) minority interest holders; 
  • the subsidiary issues shares to minority interest holders; and 
  • the subsidiary purchases its own shares from minority interest holders.
IFRIC Decision: 
 
While the IFRIC noted that conclusions could be drawn that were consistent with the current accounting for transactions with minority interest holders, it also noted that this accounting will probably change, given the Board’s tentative decision that transactions between majority and minority interest holders are equity transactions. Therefore, the IFRIC agreed that the issue should be passed to the Business Combinations Phase II team for consideration of consequential amendments to IAS 7.  
 
The classification of cash-flows arising from these scenarios has been addressed in the 1st draft of amendments to IAS 27 Consolidated and Separate Financial Statements resulting from phase II of the Business Combinations project (as a consequential amendment to IAS 7). 
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