Last reviewed: July 2026.
Cash Flow Statement Format under IAS 7 and IFRS 18 is a practical guide designed to connect current accounting requirements with clear preparation steps, calculations and review controls.
The basic IAS 7 format
The statement begins with cash flows from operating activities, followed by investing activities and financing activities. The net movement from these three sections is reconciled to opening and closing cash and cash equivalents. Comparative amounts are presented for the preceding period. The format should be clear enough for users to distinguish cash generated by day-to-day operations from cash invested in long-term resources and cash obtained from or returned to finance providers.
Operating activities section
Operating activities are the principal revenue-producing activities and other activities that are not investing or financing. Entities may present operating cash flows using the direct method or indirect method. The direct method reports major classes of gross receipts and payments. The indirect method reconciles profit to operating cash by adjusting for non-cash items, working-capital changes and items whose cash effects belong in investing or financing.
Investing activities section
Investing activities show cash spent on and received from long-term assets and investments. Common lines include purchases and disposals of property, plant and equipment, acquisitions and disposals of subsidiaries net of cash acquired, loans made to other parties and receipts from repayment. Gross presentation is normally required because offsetting receipts and payments can hide the scale of investment decisions.
Financing activities section
Financing activities show changes in equity and borrowings. Lines may include share issues, purchases of own shares, proceeds from loans, repayment of borrowings and the principal portion of lease payments. The section helps users understand how operations and investment were financed and whether the entity is increasing leverage or returning capital.
Interest and dividends
Interest and dividend cash flows require careful classification and consistent application. IFRS 18 introduced amendments to IAS 7 that affect classification and the starting point for the indirect method. Entities should document the applicable requirements, update policies for the effective date and ensure that comparative information and system mappings are prepared for transition.
Income taxes
Cash flows arising from income taxes are normally classified as operating unless they can be specifically identified with investing or financing activities. Where allocation is supportable, the tax cash flow follows the underlying transaction. The supporting schedule should explain how total tax paid was reconciled to the tax payable account and how any classification split was determined.
Foreign currency cash flows
Foreign-currency cash flows are translated using the exchange rate at the date of the cash flow, although an average rate may be used when it approximates actual rates. The effect of exchange-rate changes on cash and cash equivalents is presented separately from operating, investing and financing flows so that the opening-to-closing reconciliation remains complete.
Cash and cash equivalents note
The statement should reconcile to the cash and cash-equivalent amounts reported in the statement of financial position. The notes explain the components of cash and cash equivalents and any significant restrictions. Transfers between components of cash and cash equivalents are not cash flows because they are part of cash management rather than operating, investing or financing activity.
Non-cash investing and financing
Material non-cash investing and financing transactions are excluded from the statement but disclosed in a way that explains their nature. Examples include assets obtained through leases, shares issued as acquisition consideration and debt converted into equity. A financing-liability reconciliation helps users connect opening balances, cash changes and non-cash changes.
Illustrative layout
| Section | Typical lines |
|---|---|
| Operating | Cash generated from operations; interest and tax cash flows as classified |
| Investing | PPE purchases and disposals; acquisitions; long-term investments and loans |
| Financing | Share issues; borrowings; repayments; lease principal; owner distributions |
| Reconciliation | Net change; opening cash; exchange effect; closing cash |
Presentation review checklist
- Use consistent classification from period to period.
- Present material classes separately and avoid misleading netting.
- Agree closing cash to the statement of financial position.
- Explain restricted balances and non-cash transactions.
- Prepare for IFRS 18-linked IAS 7 changes before the effective date.
Comparative and disaggregation considerations
Comparative amounts should be presented using consistent classifications. When policies change, prior-period figures may need reclassification and the nature and amount of the change should be explained. Material cash-flow classes should be disaggregated rather than hidden in broad lines such as other operating payments. The level of detail should help users understand the drivers without overwhelming the primary statement.
Link with the notes
The cash-flow statement should connect with notes on borrowings, leases, acquisitions, disposals, tax and restricted cash. A financing-liability reconciliation separates cash changes from new leases, foreign-exchange movements, fair-value changes and other non-cash movements. Acquisition notes explain total consideration and cash acquired, while fixed-asset notes support capital-expenditure cash flows.
Common format errors
Common errors include adding non-cash depreciation to the direct method, classifying asset-disposal gains as cash receipts, failing to show exchange effects separately and using net figures when gross presentation is required. Another risk is inconsistent interest or dividend classification between periods. A final cross-statement review should detect these issues.
Related Accounting Support guides
Combine this format guide with the IAS 7 definitions guide, the indirect method guide and the step-by-step preparation guide.
Authoritative references
Refer to IAS 7 Statement of Cash Flows and IFRS 18 Presentation and Disclosure in Financial Statements.