How to treat short term provision at the time of cash flow statement
Hi,
Generally, you have a corresponding notes to accounts, with short-term provisions. It is related to items such as 'proposed dividend' and 'provision for taxation'.
Treatment of Proposed Dividend
(a) Current Year's Figure is Added to Net Profit before Taxation and Extraordinary Items (under Operating Activities)
(b) Previous Year's Figure is deducted under Financing Activity
Treatment of Provision for Taxation
(a) Current Year's Figure is Added to Net Profit before Taxation and Extraordinary Items (under Operating Activities)
(b) Previous Year's Figure is deducted from Cash Generated from Operations (under Operating Activities)
Note: If nothing is specified in the 'Notes to Accounts' for Short-term Provisions, then it is to be adjusted under 'Operating Profit before Working Capital Changes' (being a current liability). Increase in short-term provisions is added, while decrease in short-term provisions in deducted (under operating activity)
Generally, you have a corresponding notes to accounts, with short-term provisions. It is related to items such as 'proposed dividend' and 'provision for taxation'.
Treatment of Proposed Dividend
(a) Current Year's Figure is Added to Net Profit before Taxation and Extraordinary Items (under Operating Activities)
(b) Previous Year's Figure is deducted under Financing Activity
Treatment of Provision for Taxation
(a) Current Year's Figure is Added to Net Profit before Taxation and Extraordinary Items (under Operating Activities)
(b) Previous Year's Figure is deducted from Cash Generated from Operations (under Operating Activities)
Note: If nothing is specified in the 'Notes to Accounts' for Short-term Provisions, then it is to be adjusted under 'Operating Profit before Working Capital Changes' (being a current liability). Increase in short-term provisions is added, while decrease in short-term provisions in deducted (under operating activity)