Investing or financing without cash

Learning objectives

• Identify non-cash investing and financing transactions (leases, assumption of liabilities, issue of shares, conversion of debt) to be excluded from the statement and disclosed.L1, L2
• Calculate investing cash outflows excluding acquisitions financed without cash.L2, L3
• Identify the journal entry for a non-cash transaction (right-of-use asset, conversion of debt) and its lack of effect on the statement.L1, L2

Normative references

• IAS 7 §43Investing and financing transactions that do not require the use of cash or cash equivalents are excluded from the statement of cash flows; they are disclosed elsewhere in the financial statements in a way that provides all the relevant information about those activities.
• IAS 7 §44Many investing and financing activities do not have a direct impact on current cash flows although they do affect the capital and asset structure; their exclusion is consistent with the objective of the statement. Examples: the acquisition of assets either by assuming directly related liabilities or by means of a lease; the acquisition of an entity by means of an equity issue; the conversion of debt to equity.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

17 questions

• Investing and financing transactions that involve no cash are left out of the statement of cash flows and described elsewhere in the financial statements.L1
• Taking a warehouse on a lease recognised on the balance sheet gives rise to an investing outflow and a financing inflow of the same amount.L2
• Which of these transactions is a non-cash financing transaction?L1
• Why is excluding non-cash transactions consistent with the objective of the statement?L2
• Tormis acquires a company by issuing only its own shares. How does this acquisition appear in the statement?L2
• Which of these transactions of Nervelle are excluded from the statement as non-cash?L2
• For a 2 million debt-to-equity conversion, which of these presentations comply?L3
• Galdane's additions to tangible assets amount to {total_additions}, including right-of-use assets on new leases of {lease_additions} and a machine acquired by assuming the seller's loan of {assumed_liability}; the rest is paid in cash. Compute the investing outflow.L2
• During the year Marvane's fixed assets grew by {total_additions}: land received in exchange for shares issued for {shares_for_asset}, offices taken on lease for {lease_additions}, and equipment paid in cash for the balance. What amount appears as an investing outflow?L2
• Galtara's gross property, plant and equipment moves from {opening_gross} to {closing_gross}. Disposals (at cost) amount to {disposals_cost}; new leases added {lease_additions} of right-of-use assets included in this item (case data). Compute acquisitions paid.L3
• Ulvio presents an investing outflow of 900,000 and a financing inflow of 900,000 for trucks taken on lease and recognised on the balance sheet. What is the error?L2
• Bervane converted 3 million of bonds into shares; it correctly excludes the transaction from the statement but mentions it nowhere in its financial statements. What is the error?L3
• At the commencement date of a lease, Telmont recognises a right-of-use asset and a lease liability of {amount} (case data; measurement under IFRS 16). Record the entry; what is its effect on the statement for the period?L1
• Ralvane converts {amount} of bonds into new shares (case data; capital and premium combined). Record the entry and state its treatment in the statement.L2
• An equipment supplier agrees that Corbris pays for a 1.1 million production line by directly assuming the bank debt that financed it (case data). What effect on Corbris's statement?L2
• Kervelle acquires a building for 5 million: 1 million paid in cash, 4 million through a share issue to the seller (case data). Which presentation is correct?L3
• Isbane presents 2.4 million of asset additions in investing, of which 0.9 million are right-of-use assets, and in financing “new lease liabilities: +0.9 million”; no note describes non-cash transactions. What should be corrected?L3