Cash Flows Of Australian Company Essay

Cash Flows Of Australian Company Essay

Length: 1025 words (2.9 double-spaced pages)

Rating: Strong Essays

Open Document

Essay Preview


PROBLEM SOLVING: Cash flows of Australian company (Westpac Group)

From the cash flow statements of Westpac annual report (2013 and 2014), they were highly followed the AASB 107. This report analysis the Westpac annual reports by the structure, which AASB 107 provided for cash flow reporting (paragraph 18-34).

Reporting cash flow from operating activities (direct vs indirect)
According to AASB 107 paragraph 18, an entity may report their cash flow from operating activities using indirect or direct method. In particular, AASB 107 recommends the use of direct method. It is find that Westpac group also uses the direct method to illustrate cash flow from operating activities which is disclosed its major classes of gross cash receipts and gross cash payments. (see Appendix cash flow statement of Westpac).

Direct method and indirect method have their own feature respectively. The direct method reveals operating cash receipts and payments and also ‘provides information which may be useful in estimating future cash flows and which is not available under the indirect method. ‘(19 AASB 107)

Even though AASB encourage entities use direct method to prepare cash flow statement, Epstein and Pave (1992) stated that the indirect method usually needs sophisticated understanding than the direct method. By using the indirect method, firms begin with net income and make adjustments to arrive at cash flows from operations.

Reporting cash flows from investing and financing activities
Paragraph 21 of AASB 107 states that an entity should separate its major class of gross cash receipts and gross cash payments from investing and financing activities. In Westpac’s cash flow statements, it is a clear view that they report their investing and f...

... middle of paper ...

...notes, it also disclosed the detailed information of cash and cash equivalents in subsidiaries.
Which form of information is more useful for evaluating the financial performance and position of a reporting entity: cash-flow data or information about accounting profits? Explain your answers.
According to Loftus et al (2015), they believe that the cash flow data help financial statement users to not only predict future cash flows but also evaluate an entity’s financial structures. Moreover, the managers of a company can use cash flow to compare the operating performance of different entities because the cash flow are not affected by different accounting choice and judgment. As a result, by using cash flow statement, the management department could get a better understanding of company’s financial performance than other financial information about accounting profits.

Need Writing Help?

Get feedback on grammar, clarity, concision and logic instantly.

Check your paper »

Analysis Of The Australian Accounting Standard Board Essay

- Background AASB 15 Revenue from Contracts with Customer, which is published by the Australian Accounting Standard Board (AASB), is the Australian equivalent to its international namesake IFRS 15. This joint project is purposed to enhance and standardise their current requirement for accounting for revenue recognition. Thereby, the new standards apparently replace entire inconsistencies accounting pronouncement includes AASB 111 Construction Contracts, AASB 118 Revenue and related interpretations....   [tags: Financial statements]

Strong Essays
1088 words (3.1 pages)

Business Analysis: The Australian Pizza Industry Essay

- ... In particular, 2013 saw domino’s pizza experiencing a significant change in business activities with the pizza business growing into “an online digital business that sells pizza where they are the best in their class for digital sales, marketing and execution” (DPE 2013, p.06). 2.0 Compliance When preparing financial reports, it is important that organisations are compliant with laws and regulations as well as recognised accounting standards (Rogers 1996, p.25). An important compliance measure in Australia for financial reporting is the director’s declaration that must accompany the financial statements in accordance with s 295 of the Corporations Act (Cwlth 2001)....   [tags: competitors, domino´s pizza, innovations]

Strong Essays
872 words (2.5 pages)

Outline Of A Company 's Cash Flows Essay

- It’s Important for any owner to have a successful and healthy business What attracts other investors is to see that a company is eligible to meet their obligations with their creditors, employees and the investors. Creditors look for a company that is profitable enough to pay their liability (debt). Employees want to work for a company where they can know that they would get pay every month. This is why people look at the company 's cash flows. They’re 4 types of Financial statements. The income statement, reports a company 's revenues and expenses....   [tags: Balance sheet, Cash flow]

Strong Essays
801 words (2.3 pages)

Financial Strength Of Cash Flows Essay

- In a business, it is important to know how funds are generated and spent. The statement of cash flows can provide this type of information. The statement of cash flows is important as it can give an overview that other income statements or balance sheets cannot. The following will give an overview of what a statement of cash flows is, what information it provides and why they are important in assessing the financial strength of an organization. What is the Statement of Cash Flows. Organizations needed a way to present how cash was flowing in and out of their operations....   [tags: Cash flow statement, Cash flow, Balance sheet]

Strong Essays
708 words (2 pages)

Essay about The Statement Of Cash Flows

- The statement of cash flows is a very important tool available to business leaders to help them make intelligent decisions regarding the future of an organization. “The main purpose of the statement of cash flows is to report on the cash receipts and cash disbursements of an entity during an accounting period” (Edwards & Hermanson, 2007). This statement answers questions that may arise during the analysis of an income statement or balance sheet. The statement of cash flows will illustrate exactly how an organization utilized its income....   [tags: Cash flow statement, Cash flow, Income statement]

Strong Essays
823 words (2.4 pages)

Essay on Usefulness of The Statement of Cash Flows Versus The Income Statement

- USEFULNESS OF THE STATEMENT OF CASH FLOWS VS THE INCOME STATEMENT PART 1: A. A cash flow statement records the actual movement of a company’s cash, it shows where cash has come in from and what has actually been paid during the year. The cash flow statement records cash movements from three activities: operating, financing and investing. Operating activities adjusts the profit for non-cash expenses and gains and the changed in working capital and provides the cash actually received after conducting operations....   [tags: liquidity, capital, company, ]

Strong Essays
1574 words (4.5 pages)

The Technology of Cash Flows Essays

- ... It accomplishes this task by making adjustments to the net income figure from the income statement to add back non-cash related transactions (Gibson, 2011; Megan et al., 2009). As noted by Ohlson and Aier (2009), “cash in a literal sense must have been exchanged for it to have an effect on the statement of cash flows” (p. 1093). Therefore, expenses such as depreciation and amortization that do not involve the use of cash are added back to the net income for computing the cash flows (Gibson, 2011; Megan et al., 2009)....   [tags: companies management, trading goods, services]

Strong Essays
1450 words (4.1 pages)

Walmart : Corporate Cash Flows Essay

- Based on the operating cash flows to current liabilities, Walmart takes the lead. From fiscal 2012-2016, Walmart has consistently had a higher percentage of cash to cover its current liabilities. Kroger usually did better than Costco over this same period except for fiscal 2013, but even in this year Kroger and Costco were pretty much neck and neck. The five year averages for the operating cash flows for Walmart, Costco, and Kroger were 38.85%, 25.11%, and 31.89%, respectively. However, the quick ratio says the opposite....   [tags: Balance sheet, Inventory]

Strong Essays
931 words (2.7 pages)

Essay on Mutual Fund Cash Flows And Stock Market Performance

- Mutual Fund Cash Flows and Stock Market Performance* During the decade of the 1990’s through the year 2001 there were some major shifts in the deployment of investment assets. Based on a variety of measures, mutual funds grew dramatically as vehicles for investing in portfolios of stock. Specifically net cash flows into equity funds grew from $13 billion in 1990 to $310 billion in the year 2000.1 During that same period the number of equity funds rose from 1,100 to 4,395, while the number of accounts in those funds increased from 22 million to 162 million....   [tags: Economics Stock Investment Cash Analysis]

Free Essays
1802 words (5.1 pages)

Statement of Cash Flows Essay

- Statement of Cash Flows Paper The Statement of Cash flows is a very useful financial statement that can benefit investors, managers and even auditors. The statement of cash flows has not been around as long as the other financial statements such as the balance sheet or income statement. It basically “illustrates the way accounting evolves to meet the requirements of users of financial statements.” (Marshall, 2003) The statement of cash flows is designed to provide important information about the cash that a company has received or has paid out during a certain time period....   [tags: essays research papers]

Strong Essays
452 words (1.3 pages)