11-06-2011, 07:15 AM
Dear members,
I am enquiring about the best practice to account for overdraft facility in cash flow statement in line with IFRS requirements.
If a company has an overdraft, one would expect the bottomline of its cash flow statement to be negative. But companies normally don't account for overdraft in cash flow statements. They account it as creditors or payables in balance sheet while their cash flow statements show a positive end balance. I wonder how do they manage to do that.
My understanding is that overdraft will be used to buy working capital items of the business which in turn should affect the working capital elements in cash flow statement hence the effects of overdraft should be fully reflected in cash flow statement and the balance in the cash flow statement should be a negative balance if one has a net overdraft facility.
Any guidance on this will be highly appreciated.
I am enquiring about the best practice to account for overdraft facility in cash flow statement in line with IFRS requirements.
If a company has an overdraft, one would expect the bottomline of its cash flow statement to be negative. But companies normally don't account for overdraft in cash flow statements. They account it as creditors or payables in balance sheet while their cash flow statements show a positive end balance. I wonder how do they manage to do that.
My understanding is that overdraft will be used to buy working capital items of the business which in turn should affect the working capital elements in cash flow statement hence the effects of overdraft should be fully reflected in cash flow statement and the balance in the cash flow statement should be a negative balance if one has a net overdraft facility.
Any guidance on this will be highly appreciated.
