The document provides guidance on preparing cash flow statements according to accounting standards for business enterprises. It defines key terms like cash and cash flows, and classifies cash flows into three categories: operating, investing and financing activities. It describes the principal cash inflows and outflows that should be included in each category and how to prepare the cash flow statement.

1. ACCOUNTING STANDARD FOR BUSINESS ENTERPRISES
CASH FLOW STATEMENTS [Revised 01/2001]
INTRODUCTION
1. This Standard prescribes the method of preparation of a cash flow statement and the
information that should be provided in a cash flow statement.
2. The objective of a cash flow statement is to provide users of accounting statements with
information about the inflows and outflows of cash and cash equivalents of an enterprise in an
accounting period, in order to enable users of accounting statements to understand and
evaluate the ability of the enterprise to generate cash and cash equivalents and, accordingly,
to forecast the future cash flows of the enterprise.
DEFINITIONS
3. The following terms are used in this Standard with the meanings specified:
(1) Cash is cash on hand and deposits that are readily available for payment.
(2) Cash equivalents are short-term, highly liquid investments that are readily
convertible to known amounts of cash and which are subject to an insignificant risk
of changes in value. (Hereinafter, the term “cash” will be used to cover both “cash”
and “cash equivalents” unless otherwise used together with "cash equivalents").
(3) Cash flows are inflows and outflows of cash and cash equivalents of an enterprise.
CLASSIFICATION OF CASH FLOWS
4. Cash flows should be classified into the following three categories:
(1) cash flows from operating activities;
(2) cash flows from investing activities; and
(3) cash flows from financing activities
CASH FLOWS FROM OPERATING ACTIVITIES
5. Operating activities are all transactions and events of the enterprise that are not investing or
financing activities.
6. The principal cash inflows from operating activities include:
(1) cash receipts from the sale of goods and the rendering of services;
(2) receipts of tax refunds; and
(3) cash receipts relating to other operating activities.
7. The principal cash outflows from operating activities include:
(1) cash payments for goods acquired and services received;
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2. ACCOUNTING STANDARD FOR BUSINESS ENTERPRISES
CASH FLOW STATEMENTS [Revised 01/2001]
(2) payments of all types of taxes; and
(3) cash payments relating to other operating activities .
CASH FLOWS FROM INVESTING ACTIVITIES
8. Investing activities are the acquisition and disposal of long-term assets and investments not
included in cash equivalents.
9. The principal cash inflows from investing activities include:
(1) cash receipts from return of investments;
(2) cash receipts from return on investments;
(3) net cash receipts from the sale of fixed assets, intangible assets and other long-term
assets; and
(4) cash receipts relating to other investing activities.
10. The principal cash outflows from investing activities include:
(1) cash payments to acquire fixed assets, intangible assets and other long-term assets;
(2) cash payments to acquire investments; and
(3) cash payments relating to other investing activities.
CASH FLOWS FROM FINANCING ACTIVITIES
11. Financing activities are those activities that result in changes in the size and composition of
the capital and borrowings of an enterprise.
12. The principal cash inflows from financing activities include:
(1) cash proceeds from investments by others;
(2) cash receipts from borrowings; and
(3) cash receipts relating to other financing activities.
13. The principal cash outflows from financing activities include:
(1) cash repayments of amounts borrowed;
(2) cash payments for distribution of dividends or profits, or cash payment of interest
expenses; and
(3) cash payments relating to other financing activities.
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3. ACCOUNTING STANDARD FOR BUSINESS ENTERPRISES
CASH FLOW STATEMENTS [Revised 01/2001]
ACQUISITION AND DISPOSAL OF SUBSIDIARIES OR OTHER BUSINESS UNITS
14. Cash flows arising from acquisitions and from disposals of subsidiaries or other business units
should be classified as investing activities and presented separately.
15. The aggregate amount of cash paid (or received) in connection with the acquisition (or
disposal) of a subsidiary or other business unit should be presented net of cash acquired (or
disposal of):
16. An enterprise should disclose in the notes to the accounting statements, in aggregate, in
respect of acquisitions or disposals of subsidiaries and other business units, the following
information:
(1) the purchase or disposal consideration;
(2) the portion of the purchase or disposal consideration discharged by means of cash;
(3) the amount of cash in the subsidiary or business unit acquired or disposed of; and
(4) the amount of the assets and liabilities other than cash in the subsidiary and other
business unit acquired or disposed of, summarised by each major category.
CASH FLOWS OF FINANCIAL INSTITUTIONS AND INSURANCE ENTERPRISES
17. The classification of cash flow items of financial institutions and insurance enterprises is
different from that of other industries. In the preparation of a cash flow statement, when the
classification of cash flow items as specified above is not applicable, items should be
appropriately classified in accordance with their nature and the particular circumstances.
18. The following cash receipts and payments of a financial institution should be classified as
cash flows from operating activities:
(1) loans made to outsiders and the repayment of the principal of such loans;
(2) the acceptance of deposits and the repayment of the principal of such deposits;
(3) deposits from or to other financial institutions;
(4) funds borrowed from or loaned to other financial institutions;
(5) interest income and interest expenses;
(6) recovery of loans previously written off;
(7) cash receipts or payments from securities transactions of an enterprise whose business
is securities trading;
(8) cash receipts from finance leases.
19. For insurance enterprises, cash receipts and payments arising from insurance premiums,
insurance claims, annuities and other insurance policy benefits should be classified as cash
flows from operating activities.
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4. ACCOUNTING STANDARD FOR BUSINESS ENTERPRISES
CASH FLOW STATEMENTS [Revised 01/2001]
PREPARATION OF A CASH FLOW STATEMENT
20. The cash flow statement should report cash flows of an enterprise during the current period
classified by operating, investing and financing activities.
21. Cash flows should generally be reported separately as gross cash inflows and outflows.
However, cash receipts and payments on behalf of customers and for items in which the
turnover is quick, the amounts are large, and the maturities are short, may be reported on a net
basis.
Cash flows arising from each of the following activities of a financial institution should be
presented on a net basis:
(1) short-term loans made and the repayment of the principal of such loans;
(2) the acceptance and withdrawal of demand deposits;
(3) the placement of deposits with and withdrawal of deposits from other financial
institutions;
(4) funds borrowed from or loaned to other financial institutions;
(5) the acceptance of designated deposits and transfer of the funds to designated parties;
and
(6) sales and purchases of securities by an enterprise whose business is securities trading;
22. Cash flows arising from transactions in a foreign currency and the cash flows of a foreign
subsidiary should be translated at the exchange rates at the dates of the cash flows or at
average rates. The effect of changes in exchange rate on cash should be regarded as a
reconciling item and presented separately in the cash flow statement.
23. Some extraordinary items, such as a loss from a natural disaster or an insurance claim should
be classified in accordance with their nature as arising from the above cash flow categories
and presented separately.
24. An enterprise should report cash flows from operating activities using the direct method,
whereby major classes of cash receipts and cash payments are disclosed to reflect cash flows
from operating activities of the enterprise.
When the direct method is used, information about cash flows from operating activities may
be obtained either:
(1) from the accounting records of the enterprise; or
(2) by adjusting operating income, operating costs and other items in the income
statement for:
changes during the current period in inventories and operating receivables
and payables;
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5. ACCOUNTING STANDARD FOR BUSINESS ENTERPRISES
CASH FLOW STATEMENTS [Revised 01/2001]
depreciation of fixed assets, amortisation of intangible assets and other non-
cash items;
other items for which the cash effects are investing or financing cash flows.
25. An enterprise should disclose a reconciliation of net profit to cash flow from operating
activities in a note to the accounting statements.
The principal items used to adjust the net profit or loss primarily include:
(1) provision for impairment losses of assets ;
(2) depreciation of fixed assets;
(3) amortisation of intangible assets;
(4) amortisation of long-term prepaid expenses;
(5) prepaid expenses;
(6) accrued expenses;
(7) gains or losses on disposal of fixed assets, intangible assets and other long-term
assets;
(8) losses on scrapping of fixed assets;
(9) financial expenses;
(10) gains or losses arising on investments;
(11) deferred tax;
(12) inventories;
(13) operating receivables;
(14) operating payables;
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6. ACCOUNTING STANDARD FOR BUSINESS ENTERPRISES
CASH FLOW STATEMENTS [Revised 01/2001]
INVESTING AND FINANCING ACTIVITIES THAT DO NOT INVOLVE CASH RECEIPTS
OR PAYMENTS
26. Significant investing and financing activities that do not affect receipts and payments of cash
in the current period, but may affect the financial position or future cash flows of an
enterprise, should be explained in the notes to the accounting statements. Such activities
include the acquisition of assets by assuming liabilities.
SUPPLEMENTARY PROVISION
27. This Standard becomes operative as from 1 January 2001.
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7. ACCOUNTING STANDARD FOR BUSINESS ENTERPRISES
CASH FLOW STATEMENTS [Revised 01/2001]
APPENDIX : FORMAT OF CASH FLOW STATEMENT FOR REFERENCE
CASH FLOW STATEMENT
Prepared by: Period: Unit :
Items Line No. Amount
1. CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from sales of goods or rendering of services 1
Refunds of taxes 3
Other cash received relating to operating activities 8
Sub-total of cash inflows 9
Cash paid for goods and services 10
Cash paid to and on behalf of employees 12
Payments of all types of taxes 13
Cash paid relating to other operating activities 18
Sub-total of cash outflows 20
Net cash flows from operating activities 21
2. CASH FLOWS FROM INVESTING ACTIVITIES:
Cash received from return of investments 22
Cash received from return on investments 23
Cash received relating to other investing activities 25
Sub-total of cash inflows 28
Cash paid to acquire fixed assets, intangible assets and other long-term assets 29
Cash paid to acquire investments 30
Cash paid relating to other investing activities 31
Cash paid relating to other investing activities 35
Sub-total of cash outflows 36
Net cash flows from investing activities 37
3. CASH FLOWS FROM FINANCING ACTIVITIES:
Cash received from investments by others 38
Cash received from borrowings 40
Cash received relating to other financing activities 43
Sub-total of cash inflows 44
Cash repayments of amounts borrowed 45
Cash paid for distribution of dividends or profits and for interest expenses 46
Cash paid relating to other financing activities 52
Sub-total of cash outflows 53
Net cash flows from financing activities 54
4. EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH 55
5. NET INCREASE IN CASH AND CASH EQUIVALENTS 56
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8. ACCOUNTING STANDARD FOR BUSINESS ENTERPRISES
CASH FLOW STATEMENTS [Revised 01/2001]
Supplementary information Line No. Amount
1. RECONCILIATION OF NET PROFIT TO CASH FLOWS FROM
OPERATING ACTIVITIES
Net profit 57
Add:Provision for impairment losses of assets 58
Depreciation of fixed assets 59
Amortisation of intangible assets 60
Amortisation of long term prepaid expenses 61
Decrease in prepaid expenses (or deduct: increase) 64
Increase in accrued expenses (or deduct: decrease) 65
Losses on disposal of fixed assets, intangible assets and other long-term 66
assets (or deduct: gains) 67
Losses on scrapping of fixed assets 68
Financial expenses (or deduct: income) 69
Losses arising from investments (or deduct: gains) 70
Deferred tax credit (or deduct: debit) 71
Decrease in inventories (or deduct: increase) 72
Decrease in operating receivables (or deduct: increase) 73
Increase in operating payables (or deduct: decrease) 74
Others 75
Net cash flows from operating activities
2. INVESTING AND FINANCING ACTIVITIES THAT DO NOT
INVOLVING CASH RECEIPTS AND PAYMENTS
Conversion of debt into capital 76
Reclassify convertible bonds to be expired within one year as current liability 77
Fixed assets financed by finance leases 78
3. NET INCREASE IN CASH AND CASH EQUIVALENTS
Cash at the end of the period 79
Less: Cash at the beginning of the period 80
Plus: Cash equivalents at the end of the period 81
Less: Cash equivalents at the beginning of the period 82
Net increase in cash and cash equivalents 83
Note: An enterprise may adopt the format of cash flow statement before this revision.
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