Discloser Of Noncash Activities

Cash flow statement is considered as an important financial statement that every investor should get familiar. This statement provides the movement of cash inflow and out flow of a company over a period of time. Cash flow activities can be divided into operating, investing and financing activities. They are interrelated to each other. But their relationships may depend on the nature of the business, the stage of development and general economic conditions, or conditions within the market or industry in which the business operates. Like cash flow activities there are also non cash activities. Let’s find out details on non cash activities in the following article.

The information on non cash activities reveals that under IAS 7, non cash investing and financing activities are unveiled in footnotes to the financial statements. But according to US General Accepted Accounting Principles (GAAP), non cash activities may be unveiled in a footnote or within the cash flow statement itself. The activities that includes in the non cash financing activities are as follows:

1)      The activity of leasing to purchase an asset may include in non cash financing activities.

2)      To convert debt into equity is another non cash financing activity.

3)      To exchange noncash assets or liabilities for other non cash assets or liabilities

4)      To issue shares in exchange for assets

Besides knowing the cash flow activities, it is essential for investors or businessmen to know and have proper knowledge about non cash activities. Non cash activities items may also include depreciation, amortization and stock-based compensation that are expensed on the profit and loss statement. Items of property, plant and equipment are often acquired through non cash investing and financing activities. In these transactions, equipment-purchase financing is offered at the time of purchase. Such transactions can increase the production capacity of a company. They are not reported as capital expenditures in the statement of cash flows. Accordingly, free cash flow calculated based on capital expenditures reported in the statement of cash flows will often be overstated when assets are acquired through such non-cash transactions. The above details on non cash activities will be useful to you.