IAS 7Chapter 3Lesson 2
Operating activities
Step 1 of 8Learning objectives
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Operating cash flows mainly derive from the principal revenue-producing activities: customers, suppliers, employees, royalties, taxes on income (unless attached to investing or financing), dealing contracts. The proceeds from selling a fixed asset are an investing cash flow even though the gain goes through profit or loss; conversely, assets rented out and then sold in the ordinary course of business and securities held for dealing produce operating cash flows. The amount of operating cash flows is a key indicator of financial self-sufficiency.
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Learning objectives
- Identify operating cash flows and the exception for assets rented out then sold.
- Distinguish the gain on disposal, included in profit, from the disposal proceeds, classified as investing.
- Justify the classification of an ambiguous cash flow in the light of the definitions and the principal activity.