Statement of Cash Flows: Q8

Q8: Describe the indirect method of presenting a firm’s cash flows from operating activities in a firm’s Statement of Cash Flows.

A:

Ryman Healthcare has also shown it Cash flows from operating activities using the indirect method in a footnote (Footnote 21) as set out in Figure 7-2 below. This footnote shows how in 2017 Net profit after tax of $356.7m has been adjusted to calculate the Net operating cash flows of $322.8m. These are adjustments that involve various changes in balance sheet items. For example, the item Occupancy advance ($326.3m) is the difference between Gross occupancy advances in the Balance sheet of Ryman Healthcare in 2017 ($2,407.7m) and in 2016 ($2,081.4m): see Footnote 12 in Figure 7-3 below. Other examples are movements in Revenue in advance, Trade and other payables, Trade and other receivables and Employee entitlements. There are also non-cash items of Depreciation, Deferred tax and Unrealised foreign exchange loss/(gain). Another key item is Fair value movement of investment properties. With all these adjustments between Ryman Healthcare’s Net profit after tax ($356.7m) and Net operating cash flows ($322.8m), the net difference between these two items ends up not being that great at $33.9m.

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Also, see Martin’s videos Indirect Method of presenting cash flows from operating activities.

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