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Chapter 20 Group Cash Flow Statements – from “A student’s guide to group accounts” by Tom Clendon as published by Kaplan.

chapter 20

group cash flow statements

“Anyone who lives within their means

suffers from a lack of imagination”

tom clendon lecturer

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What’s new? The second edition of my book “A student’s guide to group accounts” published by Kaplan, has nineteen chapters that set out how to prepare the group statement of financial position and how to prepare the group statement of total comprehensive income. This brand new chapter – which is only available on line - is all about the preparation of the group cash flow statement. In order to prepare a statement of group cash flows you will need know two things.

1. The format of the cash flow statement. 2. How to calculate a cash flow and where in the cash flow statement that cash

in or out flow is reported. 1. The format of the cash flow statement In principle the format of the cash flow statement is quite simple as IAS7 Statement of Cash Flows (IAS7) proscribes only three headings. These are Operating Activities, Investing Activities and Financing Activities. The exact order of the items shown underneath these three headings is not formally proscribed. In preparing a statement of cash flows you are going to have remember the format as it will not be given in the question. When preparing group cash flows we are only given the opening and closing group statement of financial positions and the group statement of total comprehensive income. There are two alternative formats to the cash flow.

a) The direct method. b) The indirect method

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a) The direct method format

Group cash flow format - Direct method

1. Operating Activities

$ $

Cash received from customers X Cash paid to and on behalf of staff (X) Cash paid to suppliers (X) Cash paid for other operating expenses (X) Cash generated X Interest paid (X) Taxation paid (X) Pension contribution paid to defined benefit scheme (X) X 2. Investing Activities

Payments to buy PPE / Intangibles / Investments (X) Proceeds from sale of PPE / Intangibles / Investments X Cash paid to buy investments in new subsidiary / associate / JV (X) Cash / overdraft taken over in new subsidiary X / (X) Sale proceeds from disposal of shares in subsidiary / associate /JV X Cash / overdraft passed away on disposal of a subsidiary (X) / X Dividends received from investments (inc. from associates and JV) X Capital government grants received X (X) 3. Financing Activities

Proceeds from an equity share issue X Dividends paid (X) Dividends paid to the NCI (X) Control to control cash proceeds when NCI increases X Control to control cash paid when NCI decreases (X) Proceeds from the issue of new debt / debentures / loan stock X Repayment of debt / redemption of debentures / loan stock (X) Capital element of repayment of finance lease obligations (X) X/(X) Change in cash and cash equivalents X/(X) Opening cash and cash equivalents X/(X) Closing cash and cash equivalents X/(X)

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Explanation of the direct method Unsurprisingly cash inflows are reported as positive numbers whilst cash out flows are reported as negative numbers, and so in brackets. I make this point because when I am marking scripts I know that too many candidates make this error. To quote from a recent ACCA P2 examiner’s report “Consolidated statement of cash flows questions - candidates often place the wrong sign on the correct figure. For example, a deduction is made in the statement rather than an addition. If this is a simple subtraction of two figures and the candidate puts the wrong sign on the resultant figure then it is difficult to award marks.” Operating Activities (direct method) The cash flows reported in Operating Activities are the sort of cash flows that you would expect, in that they relate to the day to day operating activities of the group. Cash is received from customers and then paid to suppliers, staff and for other expenses. It is all very logical. It is worth noting that included in Operating Activities section is the taxation paid and interest paid. At this stage I think it worth pointing out that the taxation paid will not be the same figure as the taxation charged in the profit or loss. On the same basis the interest paid may not be the same as the finance cost charged in the statement of profit or loss. The basic reason for this is simple. The cash flow statement is reporting cash flows. The amount of cash paid. Whereas the statement of profit or loss is reporting the expense of the period which takes into account the accruals concept. For example the tax charge to profit or loss will include an adjustment for deferred taxation which is not a cash item. Investing Activities The cash flows reported in Operating Activities are cash flows that relate to non-current assets. After all when we talk about investing in the business it means buying these type of assets! So it is natural to include the cash spent buying or constructing property plant and equipment and intangible assets as well as buying investments in subsidiaries, associates and joint ventures as cash outflows in Investing Activities. Of course if any of these non-current assets are sold for cash or generate a cash return (e.g. dividends received) then these cash inflows are also reported in Investing Activities. Financing Activities As you may know from your financial management studies there are two ways of financing the long term capital of a business, debt and equity. The financing activities therefore includes those cash flows with equity i.e. the shareholders. These are primarily to do with the issue of shares for cash and the payment of dividends but also include the cash flows when there are control to control transactions that increase or decrease the NCI.

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The financing activities also include the cash flows with debt e.g. those who have lent money to the business. These include the cash received following the issue of debentures and the cash paid back to redeem those loans. As finance leases are in substance a loan so the loan repayments on finance lease obligations are also reported as a cash out flow under financing activities. Cash and cash equivalents. The cash flow statement reconciles to the changes in cash and cash equivalents. These comprise cash on hand and demand deposits, together with short-term, highly liquid investments that are readily convertible to a known amount of cash, and that are subject to an insignificant risk of changes in value. IAS 7 does not define ‘short term’ but does state ‘an investment normally qualifies as a cash equivalent only when it has a short maturity of, say, three months or less from the date of acquisition’. Consequently, equity or other investments which do not have a maturity date are excluded from cash equivalents unless they are, in substance, cash equivalents. This three-month time limit is somewhat arbitrary but is consistent with the concept of insignificant risk of changes in value and a purpose of meeting short-term cash commitments.

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b) The indirect format The other cash flow statement format is known as the indirect method. This only differs from the direct method in the initial part of the Operating Activities section.

Group cash flow format - Indirect method

1. Operating Activities

Profit before tax X Less investment income (X) Less income from associate / joint venture (X) Plus finance cost X Depreciation X Less capital government grant released (X) Amortisation X Impairment loss (charged in profit or loss) e.g. goodwill X Loss on disposal of assets (profit) X / (X) Increase in provisions included in profit before tax (decrease) X / (X) Foreign exchange loss (gain) at the individual company stage X / (X) Current service cost / Past service cost / Settlement & curtailments X Share based payments X Change in working capital Increase / decrease in inventory (X) / X Increase / decrease in receivables and prepayments (X) / X Increase / decrease in trade payables and accruals X / (X) Cash generated X Interest paid (X) Taxation paid (X) Pension contribution paid to defined benefit scheme (X) X

2. Investing Activities

Payments to buy PPE / Intangibles / Investments (X) Proceeds from sale of PPE / Intangibles / Investments X Cash paid to buy investments in new subsidiary / associate / JV (X) Cash / overdraft taken over in new subsidiary X / (X) Sale proceeds from disposal of shares in subsidiary / associate /JV X Cash / overdraft passed away on disposal of a subsidiary (X) / X Dividends received from investments (inc. from associates and JV) X Capital government grants received X (X)

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3. Financing Activities

Proceeds from an equity share issue X Dividends paid (X) Dividends paid to the NCI (X) Control to control cash proceeds when NCI increases X Control to control cash paid when NCI decreases (X) Proceeds from the issue of new debt / debentures / loan stock X Repayment of debt / redemption of debentures / loan stock (X) Capital element of repayment of finance lease obligations (X) X/(X) Change in cash and cash equivalents X/(X) Opening cash and cash equivalents X/(X) Closing cash and cash equivalents X/(X)

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Explanation of the indirect method In what initially seems a little bizarre for something called a cash flow statement, the indirect method opens up, not with a cash at all but rather Profit Before Tax. The Profit Before Tax is then reconciled to the cash generated by adjusting for non-cash items. From interest paid the rest of the cash flow statement is the same. In the reconciliation of Profit Before Tax to cash generated (“the reconciliation”) non-cash expenses charged against profit before tax are added back. Take for example depreciation as the classic non-cash expense. This has clearly reduced profit but has not resulted in a cash outflow. So when we are trying to reconcile profit to the cash generated it is necessary to add back depreciation. Other non-cash expenses that have been charged in arriving in profit are also added back for example losses on disposal on non-current assets, finance costs and increases in provisions. On the same basis items of income which boost profit but are not cash flows are deducted in the reconciliation. Examples of income that are deducted include profit on the disposal of non-current assets or decreases in provisions.

Also included in the reconciliation part of the indirect method operating activities are the changes in working capital. For example if the business buys inventory then this transaction on its own has no impact on profit but can result in a reduction in cash thus an increase in inventory year on year is “bad” for cash flow and the difference is a negative in the reconciliation. On the same logic receiving cash from a receivable also has no impact on the profit but is “good” for cash as it results in a cash inflow and so for any decrease in receivables year on year the difference is a positive in the reconciliation. Finally paying a trade creditor has no impact on profit but results in a reduction in cash so any decrease in trade payables year on year is “bad” for cash and the difference is a negative in the reconciliation.

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2. How to calculate a cash flow and where in the cash flow statement that cash in or out flow is reported Now that we have looked at the format of cash flows we can now turn our attention as to how to calculate cash flows. Basically cash flows are derived as missing figures. Ascertaining cash flows at its simplest do not deserve a complicated working. For example if the finance cost charged in profit is $100 but at the year-end there is an accrual for interest owing of $5 then it seems natural to conclude that the interest actually paid and an operating cash outflow is only $95 (being $100 - $5) as all of the expense has been paid. Where the cash flow needs a proper working because it is not just involving two figures then it is necessary to reconcile the opening balance of an item to its closing balance showing all the reasons why the item has either increased or decreased. In this process of making the opening and closing balances reconcile the cash flow will be revealed as the missing / balancing figure. To quote from a recent ACCA P2 examiner’s report - “Consolidated statement of cash flows questions - It is important as always to show all workings. For example, very few candidates correctly calculated the income taxes paid figure but there were several marks for this calculation, which were often awarded in the workings in the scripts. Many of the figures in the statement do not need workings but where they do, it is important to show them.”

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Cash Flow Exercise to show the basic technique Calculate the cash flows given the following extracts from statements of financial position drawn up at the year ended 31 December 20X0 and 20X1. 20X1 20X0 Non-Current Assets $ $ Property Plant & Equipment (PPE) 300 100

During the year depreciation charged was $20, a revaluation surplus of $60 was recorded, PPE with a CV of $15 were disposed of and PPE acquired subject to finance leases had a CV of $30. Required: How much cash was spent on PPE in the period? Answer to cash flow exercise Well we know that the cash spent on PPE will be an outflow and an investing activity. The working showing the reconciliation is as follows. PPE Explanation Opening balance 100 From the opening s of fp Depreciation (20) Depreciation reduces the carrying value Surplus 60 The revaluation gain increases carrying value Disposal (15) The carrying value of the asset being sold reduces Finance lease 30 A new finance lease means there is more PPE 155 Cash - balancing figure 145 Closing balance 300 From the closing s of fp

The explanations are provide for your benefit and it would be unnecessary to include in an examination answer. Incidentally in terms of exam technique never show your workings like this 100-20+60-15+30-300 = 145 This row format of numbers does not lend itself to any form of reference or annotation as to the source of the numbers so is difficult to mark. The working can be shown as a T account. T accounts are perhaps a little old fashioned and can lead to errors unless you are already very proficient with double entry. This working is shown as a T account in the double entry section.

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Group cash flow issues Let me take you through four cash flow issues that specific to group accounts. 1. Dividends paid to the NCI. In a group cash flow statement intercompany cash flows are not reported. The whole basis of preparing group accounts is to show the group as if it were a single entity. Thus any dividends paid by the subsidiary that are received by the parent are neither a cash out flow or inflow of the group. However the dividend that the subsidiary pays out to the NCI is a cash out flow and is reported in Financing Activities as it is a cash transaction with equity. If the group statement of changes in equity is not given in the question then the dividends paid to the NCI can be ascertained as a balancing figure of the NCI. Cash Flow Exercise – dividend paid to the NCI Calculate the cash flow given the following extracts from statements of financial position drawn up at the year ended 31 December 20X0 and 20X1. 20X1 20X0 Equity $ $ Non-controlling interest 840 440

In the group statement of comprehensive income, the total comprehensive income attributable to the NCI was $500. During the year the parent acquired more shares in the subsidiary and this changed the NCI by $60. Required: How much was the cash dividend paid to the non-controlling interest? Answer dividend paid to the NCI The dividend paid to the NCI is cash out flow and a financing activity. The working is as follows. NCI Explanation Opening balance 440 From the opening s of fp Profit attributable to the NCI 500 Profit increases equity / NCI Reduction in the NCI (60) Parent buys out the NCI (control to control) 880 Cash - balancing figure 40 Closing balance 840 From the closing s of fp

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2 Dividends received from equity accounted investments (Associates and Joint Ventures) The application of equity accounting means that in the group statement of comprehensive income and the group statement of financial position the share of profit has been recognised. In the group statement of cash flows we want to have reported the cash flow received as a return on such investments! The cash that the group will receive will be in the form of dividends. This is a cash inflow and as return on an investment will be reported in investing activities. The dividend received from the associate (or joint venture) will be ascertained as a balancing figure when reconciling the opening and closing balances of the carrying value of the equity accounted investment in the group accounts. Cash Flow Exercise – dividend received from an associate Calculate the cash flow given the following extracts from statements of financial position drawn up at the year ended 31 December 20X0 and 20X1. 20X1 20X0 Non-Current Asset $ $ Investment in associate undertaking 500 200

The group statement of profit or loss reported “Income from Associate Undertakings’ of $750. Required: How much was the cash dividend received by the group? Cash in and an investing activity. Answer – dividend received from an associate The dividend received from an associate is a cash inflow and an investing activity. The working is as follows. Investment in the associate Explanation Opening balance 200 From the opening s of fp Plus the % of profit 750 Profit increases the asset 950 Cash - balancing figure 450 Closing balance 500 From the opening s of fp

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3 Acquisition or disposal of a subsidiary. When a parent buys shares in an entity such that the parent gains control then a subsidiary has been acquired and the cash element of the consideration paid is a cash outflow and reported in investing activities. In addition the cash and cash equivalents held by the new subsidiary that has been taken over will flow into the group and also be reported in investing activities. When a parent sells part or all of an investment that results in control being lost this means the parent has disposed of an investment and the cash element of the consideration received, a cash inflow and reported in investing activities. In addition the cash and cash equivalents held by the old subsidiary will flow out of the group and also be reported in investing activities. However there is an all pervading complication when there has been an acquisition of a subsidiary as the business combination will mean that the group has more goodwill, more NCI, and more of each asset and each liability. This means that when we are reconciling any opening or closing balance to ascertain the cash flow as the balancing figure we will have to add the impact of the acquisition of the subsidiary on that item. Now the same all pervading complication also arises when there has been a disposal of a subsidiary as the disposal results in the group having less goodwill, NCI, assets and liabilities. This means that when we are reconciling any opening or closing balance to ascertain the cash flow as the balancing figure we will have to deduct the impact of the disposal of the subsidiary on that item. , Cash Flow Exercise – including the impact of an acquisition and disposal of a subsidiary in the period Calculate the cash flow given the following extracts from statements of financial position drawn up at the year ended 31 December 20X0 and 20X1. 20X1 20X0 Non-Current Assets $ $ Property Plant & Equipment 600 450

During the year depreciation charged was $200, and the group acquired one subsidiary with PPE of $300, and disposed of another with PPE of $10. Required: How much cash was spent on PPE in the period?

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Answer Cash Flow Exercise – including the impact of an acquisition and disposal of a subsidiary in the period The payment to buy PPE is a cash outflow and an investing activity. The working is as follows. PPE Opening balance 450 From the opening s of fp Depreciation (200) Depreciation reduces the asset PPE acquired in the new sub 300 The new sub results in more PPE PPE lost on disposal of sub (10) The disposal of the sub results in less PPE 540 Cash - balancing figure 60 Closing balance 600 From the closing s of fp

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4 Foreign exchange differences Now I hope you saying to yourself – hang on but foreign exchange differences are not cash flows! Well you are correct! Foreign exchange differences, whether they arise at the individual or group stage, are like depreciation in that they are not cash flows themselves but are necessary to be included in reconciliations when we are ascertaining cash flows. You know how when the group acquires a subsidiary during the accounting period it means that in the group statement of comprehensive income there is the need to make adjustments all over the place for time apportioning, well it is like that in a group cash flow where there is an overseas subsidiary! Here a lot of exchange differences are thrown up, not only on assets and liabilities but also on goodwill and NCI, so whenever any of these are being reconciled to ascertain the cash flow as a balancing figure their exchange difference will also have to be taken into account. Foreign exchange gains increase assets but decrease liabilities. Foreign exchange losses decrease assets and increase liabilities. When the indirect method for operating activities is used and there has been a foreign exchange loss (gain) at the individual company stage correctly recognised in profit or loss then this has to added back (deducted) just like depreciation as they are both non-cash expenses. Cash Flow Exercise – including the impact of a foreign exchange difference Calculate the cash flow given the following extracts from statements of financial position drawn up at the year ended 31 December 20X0 and 20X1.

20X1 20X0 $ $ Non-current liability 1,000 3,500 Loan

The loan is denominated in a foreign currency, and a loss of $500 has been recorded on the retranslation. Required: How much cash was spent repaying the loan? Answer to Cash Flow Exercise – including the impact of a foreign exchange difference Loan Explanation Opening balance 3,500 From the opening s of fp Foreign currency exchange loss 500 The loss will increase the liability 4,000 Cash - balancing figure 3,000 Closing balance 1,000 From the closing s of fp

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Mind Map

Format

Indirect method (reconciliation PBT)

Operating Activities

Direct method

NCA payments to buy (out)

Investing Activities

NCA sale proceeds or returns (in)

Debt borrow (in) or repay (out)

Financing Activities

Equity Dividends paid (out) proceeds from share issue (in) control to control (in or out)

Cash and cash

equivalents

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Double entry

All the reconciliation workings to ascertain cash flow as a balancing figure can of course be explained in double entry terms – indeed they are really old fashioned T accounts just turned into a vertical column. I guess if you really love double entry you would realised that a long time ago. Let us re-examine the original exercise.

Cash Flow Exercise to show the technique Calculate the cash flows given the following extracts from statements of financial position drawn up at the year ended 31 December 20X0 and 20X1. 20X1 20X0 Non-Current Assets $ $ Property Plant & Equipment (PPE) 300 100

During the year depreciation charged was $20, a revaluation surplus of $60 was recorded, PPE with a CV of $15 were disposed of and PPE acquired subject to finance leases had a CV of $30. Required: How much cash was spent on PPE in the period?

PPE (carrying value) account $ $ Opening balance 100 Depreciation 20 Revaluation surplus 60 Disposal 15 Finance lease 30 Cash – balancing figure 145 Closing balance 300 335 335

The opening balance of $100 is a debit because PPE is an asset and assets are debit balances Depreciation is an expense that is charged to profit (debit) and reduces the carrying value of the asset (credit). The revaluation surplus is a gain that is recognised in equity and other comprehensive income (credit) and increases the asset (debit). The disposal reduces the carrying value of the asset (credit) and is transferred to a disposal account (debit). New finance leases represent new assets (debit) and new liabilities (credit). The closing balance is a credit as it has to be a debit when is brought down to be the opening balance of next year.

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Technical corner Usefulness of cash flow statements On the one hand you need to know how to prepare a group cash flow statement but let us also consider how useful they are. A statement of cash flows provides information that is not available from statements of financial position and statements of comprehensive income. Cash flow statements can be the basis of a business valuation. Analysts and other users of financial information often, formally or informally, develop models to assess and compare the present value of the future cash flow of entities. Cash flow statements can give an indication of the relationship between profitability and cash generating ability, and thus of the quality of the profit earned. A business that year on year reports a profit but never generates cash is said to how low quality profits. The profit may be generated through the manipulation of estimates and polices. Cash flow is free from judgement of value and the subjective allocation of the accruals concept. It cannot easily be manipulated and is not affected by accounting policies. It is reliable. A statement of cash flow in conjunction with a statement of financial position provides information on liquidity, solvency and adaptability. The statement of financial position is often used to obtain information on liquidity, but the information is incomplete for this purpose as the statement of financial position is drawn up at a particular point in time. Limitations of the statement of cash flows Of course nothing is perfect and we can also consider the limitations of cash flow statements. Statements of cash flows are based on historical information and therefore do not provide complete information for assessing future cash flows. Users are much more interested in future cash flows. There is some scope for manipulation of cash flows. For example, a business may delay paying suppliers until after the year-end, or it may structure transactions so that the cash balance is favourably affected e.g. a sale and lease back, or a raising finance by issuing zero coupon bonds which are redeemable at a large premium. Deliberate manipulation is possible e.g. assets may be sold and then immediately repurchased or proceeds from raising funds or selling PPE classifies in operating activities. The application of the substance over form principle and an understanding of the format should alert users of the financial statements to the true nature of such arrangements.

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Exercise - Operating Activities direct & indirect Extracts from the financial statements are as follows. $ Operating profit 80,000 Investment income 12,000 Finance costs (10,000) Profit before tax 82,000 Tax (32,000) Profit for the year 50,000 Other comprehensive income Revaluation gain 40,000 Total comprehensive income 90,000 Closing balance Opening balance Current assets Inventory 30,000 25,000 Receivables 20,000 26,000 Current liabilities Trade payables 14,000 11,000

Additional information During the year depreciation of $25,000 was charged, an impairment loss of $40,000 recognised on an asset that had not been revalued. Employment costs charged included $20,000 for a current service cost on the defined benefit pension scheme and $15,000 in respect of an equity settled share based scheme. In arriving at operating profit negative goodwill of $6,000 and a foreign currency exchange gain of $4,000 have been recognised. Receipts from customers, combined with cash sales, were $800,000, payments to suppliers of raw materials $400,000, other operating cash payments were $100,000 and cash paid on behalf and to employees was $126,000. Required a) Using the indirect method determine the cash generated from operating activities

b) Using the direct method determine the cash generated from operating activities

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Question Weller Set out below is a summary of the accounts of Weller for the year ended 31 December 20X7. Consolidated statement of total comprehensive income for the year ended 31 December 20X7. $000 Revenue 44,754 Cost of sales and other expenses (39,613) Income from associates 30 Finance cost (note 3) (305) ------------ Profit before tax 4,866 Income tax (2,038) ------------- Profit for the period 2,828 Other comprehensive income: items that may be reclassified to profit or loss in future periods

Group exchange difference on retranslation of foreign subsidiary (note 5)

302

------------ Total comprehensive income 3,130 ------------ Profit for the year attributable to: Attributable to owners of the parent 2,805 Attributable to Non-controlling interests 23 ------------ Profit for the period 2,828 ------------ Attributable to owners of the parent 3,107 Attributable to Non-controlling interests 23 ------- Total comprehensive income 3,130 -------

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Statement of Changes in Group Equity Shares OCE Retained Earnings NCI Total $000 $000 $000 $000 $000 Opening balance 7,000 805 6,359 17 14,181 Comprehensive income 302 2,805 23 3,130 Dividends paid (445) (20) (465) Acquisition of a subsidiary 150 150 -------- ------- ---------- ----- --------- Closing balance 7,000 1,107 8,719 170 16,996 --------- ------- ---------- ----- -------

Consolidated statements of financial position at 31 December 20X7 20X6 Note $000 $000 $000 $000 Non-current assets Intangible asset goodwill (4&5) 500 85 Tangible assets (1) 11,157 8,900 Investment in associate 300 280 ----------- ----------- 11,957 9,265 Current assets Inventories 9,749 7,624 Receivables 5,354 4,420 Investments (30 day bonds) 1,543 741 Cash at bank and in hand 1,013 17,659 394 13,179 ------------- ---------- ---------- ----------- 29,616 22,444 ---------- ---------- Equity and liabilities Equity share capital 7,000 7,000 OCE 1,107 805 Retained earnings 8,719 6,359 NCI 170 17 ----------- ---------- Total equity 16,996 14,181 Non-current liabilities: Loans 2,102 1,682 Provision for deferred tax 555 689 Pension deficit (3) 735 246 Current liabilities (2) 9,228 5,646 ---------- ---------- 29,616 22,444 ----------- ----------

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Notes to the accounts (1) Tangible assets Non-current asset movements included the following: $000 Disposals at carrying amount 305 Proceeds from asset sales 854 Depreciations provided for the year 907 (2) Current liabilities 20X7 20X6 $000 $000 Bank overdraft 1,228 91 Trade payables 4,278 2,989 Tax 3,722 2,566 --------- -------- 9,228 5,646 --------- -------- (3) Pension fund deficit

The company has a defined benefit pension fund and the reconciliation of its deficit is as follows.

$000 At 31 December 20X6 246 Net finance cost 29 Current service cost 560 Cash contribution (100) --------- At 31 December 20X7 735 --------- (4) Hannah During the year, the company acquired 82% of the issued equity capital of

Hannah for a cash consideration of $1,268,000. The non-controlling interest is valued using the proportion of net assets method

$000 Non-current assets 208 Inventories 612 Trade receivables 500 Cash in hand 232 Trade payables (407) Debenture loans (312) --------- 833 -------

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(5) Group Exchange gains Exchange gains on translating the financial statements of a wholly-owned

subsidiary have been taken to equity and comprise differences on the retranslation of the following:

$000 Goodwill 9 Non-current assets – PPE 100 Inventories 116 Trade receivables 286 Trade payables (209) --------- 302 -------

Required: Prepare the statement of cash flows for the Weller group for the year ended 31 December 20X7 using the indirect method.