DFS - Statement of cash flows

twinmeister

I can't get my head around the calculation of tax paid as part of the cash flow from operating activities, especially when you are given a statement of financial position showing the tax liability for two years and the tax payable in the Income Statement. I always want to put in the figure from the IS, but this is wrong.

e.g asked to prepared Statement of Cash Flow for at 31/12/2005.

Given tax liability of £285,000 at end of 2004 and £291,000 at end of 2005. Tax from 2005 Income Statement is £750,000. What is the tax paid in the 2005 year?

Any tips anyone?

Thanks.

twinmeister

another thing

More queries:

1)do you deduct or add in an inflow of income from investment e.g. income from dividends. Is this recorded in investing activities?

2) where do you record net cash flow from discontinuing operations? In operating activities before deducting interest and tax?

Urggh my head hurts.

jilt

twinmeister wrote: »

I can't get my head around the calculation of tax paid as part of the cash flow from operating activities, especially when you are given a statement of financial position showing the tax liability for two years and the tax payable in the Income Statement. I always want to put in the figure from the IS, but this is wrong.

e.g asked to prepared Statement of Cash Flow for at 31/12/2005.

Given tax liability of £285,000 at end of 2004 and £291,000 at end of 2005. Tax from 2005 Income Statement is £750,000. What is the tax paid in the 2005 year?

Any tips anyone?

Thanks.

Using the figures you've quoted:

balance owed 31.12.04 £285,000
charge for y/ended 05 £750,000
Total £1035,000
balance at 31.12.05 £291,000
therefore paid y/ended 05 £744,00

or do a T account.

Does that help at all?

jilt

twinmeister wrote: »

More queries:

1)do you deduct or add in an inflow of income from investment e.g. income from dividends. Is this recorded in investing activities?

2) where do you record net cash flow from discontinuing operations? In operating activities before deducting interest and tax?

Urggh my head hurts.

1) You add in income from investments (dividends) in investing activites. You add it becasue its cash you've received so it increases your cash flow

2) If there were any discontinued operations wouldn't they be recorded in the income statement, but seperately to the continuing operations, and therefore included in the operation profit that you start the reconciliation between profit and net cash etc with?

twinmeister

Jilt - thanks so much. Much better to layout Tax cash flow that way. Think my confusion is seeing the IS as tax paid, but it's not is it. As you say, it's tax charged.

Also see your point in discontinuing ops, it just the Osborne book I'm working is really vague on this point (p179) and says IFRS5 requires that net cash flows attributable to the discontinued ops are to be disclosed on the face of the statement of cash flows.

Am I right in thinking the term 'disclosed' means as a shown as note and 'recorded' means noted in the actual statement?

Ta

jilt

twinmeister wrote: »

Jilt - thanks so much. Much better to layout Tax cash flow that way. Think my confusion is seeing the IS as tax paid, but it's not is it. As you say, it's tax charged.

Also see your point in discontinuing ops, it just the Osborne book I'm working is really vague on this point (p179) and says IFRS5 requires that net cash flows attributable to the discontinued ops are to be disclosed on the face of the statement of cash flows.

Am I right in thinking the term 'disclosed' means as a shown as note and 'recorded' means noted in the actual statement?

Ta

Just read page 179 it says 'disclosed either on face of cash flow statement or in the notes to the financial statements' so if asked to explain how its recognised I would put that. Don't think I've ever seen any discontinued operations coming up the practical side of the papers so I wouldn't worry too much. And it is a 'reconcilliation of profit from operations to net cash flow from operating activites' doesn't mention wether they are continueing or not.

Good luck