Case:
In the cash flow statement of a company, certain amount was reported as repayments of External Commercial Borrowings under the head ‘Cash Flow from Financing Activities’. It was noted that the balances of ‘External Commercial Borrowings” reduced from the previous year to the current year.
As per Para 43 of IND AS 7 “Investing and financing transactions that do not require the use of cash or cash equivalents should be excluded from a cash flow statement. Such transactions should be disclosed elsewhere in the financial statements in a way that provides all the relevant information about these investing and financing activities.”
Observation:
It was noted from notes to the financial statements of a company on ‘Non-Current Borrowings’ and ‘Other Current Financial Liabilities’ that balances of “External Commercial Borrowings’ shown under both Non-current borrowings and Other current financial liabilities reduced from previous year to current year. As per the notes, the reduction indicated repayment during the year.
However, in the Cash Flow Statement under the head ‘Cash Flow from Financing Activities’, the amount of repayments of External Commercial Borrowings reported was different from what should have been done as compared to the reduction disclosed in the notes to the financial statements.
It was viewed that if the difference in the amounts reported in the cash flow statement and what should have been reported as per the notes to the financial statements were due to any repayment in a mode other than cash.
Conclusion:
If any repayment in mode other than cash is made then the same should have been disclosed separately as required in paragraph 43 of Ind AS 7 but no such disclosure was made in the above case.
Accordingly, it was viewed that the requirements of Ind AS 7 have not been complied with.
