Page 234 - DMGT202_COST_AND_MANAGEMENT_ACCOUNTING

Unit 13: Cash Flow Analysis (As Per AS-3)

13.2.2 Cash Flow from Investing Activities Notes

Investing activities of an enterprise include the purchase of fixed assets (as plant and machinery,

land and buildings, furniture and fixtures) with an intention to generate the future incomes.
On account of being an important activity, a separate disclosure of the cash fl ows from these
activities is made. Examples of cash flows arising from investing activities are in AS-3 (revised)

as follows:
1. Cash payments of acquired fixed assets (including intangibles). These payments include

those relating to capitalized research and development costs and self-constructed fi xed
assets;

2. Cash receipts from disposal of fixed assets (including intangibles);
3. Cash payments to acquired shares, warrants or debt instruments of other enterprises and
interests in joint ventures (other than payments for those instruments considered to be cash
equivalents and those held for dealing or trading purposes);
4. Cash receipts from disposal of shares, warrants or debt instruments of other enterprises
and interests in joint ventures (other than receipts from those instruments considered to be
cash equivalents and those held for dealing or trading purposes);
5. Cash advances and loans made to third parties (other than advances and loans made by a
fi nancial enterprise);
6. Cash receipts from the repayment of advances and loans made to third parties (other than
advances and loans of a fi nancial enterprise);
7. Cash payments for future contracts, forward contracts, option contracts and swap contracts
except when the contracts are held for dealing or trading purposes, or the payments are
classifi ed as financing activities; and

8. Cash receipts from future contracts, forward contracts, option contracts and swap contracts
except when the contracts are held for dealing or trading purposes, or the receipts are
classifi ed as fi nancing activities.

Did u know? When a contract is accounted for as a hedge of an identifi able position, the

cash flows of the contract are classified in the same manner as the cash flows of the position

being hedged.
Figure 13.2: Diagrammatic Presentation of Cash Flow from Investing Activities
Cash Flow

Cash Inflow Cash Outflow

Disposal Disposal Receipts Receipts
of Fixed of Shares of Repayment from Future
Assets & Warrants of Advances Contracts
& Loans

Purchase of Purchase of Advances & Payment to
Fixed Assets Shares, Loans to Future
Warrants Third Parties Contracts

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