Accounting Business Reporting for Decision Making

280 Accounting: Business Reporting for Decision Making

FIG U R E 7. 2 (continued)

JB Hi-Fi Ltd

Statement of cash flows for the financial year ended 30 June 2015

Consolidated

Note

2015

$’000

2014

$’000

(b) Reconciliation of net cash inflow from operating

activities to profit

Profit for the year

Depreciation and amortisation

Impairment of plant and equipment

Non-cash employee benefits expense — share-based payments

Net loss on sale of non-current assets

Fair value adjustment to derivatives

Changes in operating assets and liabilities net of effects from

acquisition of businesses:

(Increase) decrease in inventories

(Increase) decrease in current receivables

(Increase) decrease in other current assets

(Increase) decrease in deferred tax assets

(Decrease) increase in current payables

(Decrease) increase in current provisions

(Decrease) increase in other current liabilities

(Decrease) increase in non-current provisions

(Decrease) increase in other non-current liabilities

(Decrease) increase in current tax liabilities

136 511

39 124

1 119

3 508

997

111

(22 011

(10 836

(2 097

(2 454

25 892

3 817

491

2 847

1 279

1 598

)

)

)

)

128 447

35 530

3 592

382

937

(29 580

(6 169

723

637

(88 212

155

175

(716

2 162

(6 737

)

)

)

)

)

Net cash inflow from operating activities 179 896 41 326

Source: JB Hi-Fi Ltd 2015, preliminary final report, pp. 60, 93.

Operating activities

Operating activities are those activities that relate to the provision of goods and services, and other

activities that are neither investing nor financing activities. These activities relate to the normal activities

of the entity. Examples of cash inflows from operating activities include the cash sale of goods or ser-

vices, cash received from customers, and the receipt of interest or dividends. Examples of cash outflows

from operating activities include payments to suppliers, the payment of salaries and wages, and the pay-

ment of tax and interest.

Before a closer examination of each component is undertaken, it is important to remember that entities

will normally collect and record information regarding their business transactions based on the accrual

method of accounting. As explained in chapter 6, the reasons for this generally relate to the appropriate

recognition of all transactions affecting income, expenses, assets, liabilities and equity for a given period.

Recording transactions in this way is necessary for the preparation of the statement of profit or loss and

the balance sheet. Given that the statement of cash flows is concerned with when receipts and payments

are made and not with the appropriate recognition of income and expense transactions, some adjustments

need to be made to the information collected. For example, the recording of a sale does not necessarily

correspond to when a receipt is received. This is because a sale may be made on credit, with the payment

received a month or more later. Illustrative example 7.1 shows how each transaction affects the profit and

cash position differently. Therefore, a sale may increase profit (in the statement of profit or loss) but, if the

amount owing is not collected, it will have no effect on the cash position (in the statement of cash flows).

Examine the cash flows from operating activities for JB Hi-Fi Ltd as presented in figure 7.2. The

statement shows that JB Hi-Fi Ltd had a positive net cash flow from operating activities of $179 896 000.

Compare this figure to the profit figure in JB Hi-Fi Ltd’s statement of profit or loss (presented in