Home / Answers / What is the operating cash flow reconciliation change?
What is the operating cash flow reconciliation change?
The indirect method now starts at the profit or loss total where there is no operating subtotal, and the direct method reconciliation goes to the same destination. Three paragraphs move together.
What changed in AASB 107?
A new paragraph Aus20.1 gives an indirect method starting point to a superannuation entity applying AASB 1056 and to a public sector not-for-profit that has elected the category relief and does not present an operating profit or loss subtotal. The starting point is the profit or loss total, adjusted for non-cash items, deferrals and accruals, and income or expense tied to investing or financing cash flows.
What changed in AASB 1054?
Paragraph 16 now sends the direct method reconciliation to the operating profit or loss subtotal under AASB 18 paragraph 69(a), or to the profit or loss total for a superannuation entity applying AASB 1056 or a public sector not-for-profit without that subtotal.
What changed in AASB 1039?
Paragraph 21 is reworded so the concise financial report exemption matches the amended destination. It is a wording change with a real effect on which reconciliation a concise report may leave out.
Why do the three paragraphs have to move together?
The AASB 107 paragraph sets the cash flow starting point, the AASB 1054 paragraph sets the reconciliation destination, and the AASB 1039 paragraph sets what the concise report may omit. A change to one without the others leaves the statements disagreeing.
Which method does my entity use?
The duty depends on it. The indirect method paragraph applies only where the indirect method is used. The AASB 1054 reconciliation applies only where the direct method is used. The check asks the method before it returns either.
What about net cost of services?
A not-for-profit entity using the direct method and highlighting net cost of services must reconcile operating cash flows to that measure. That is a separate duty from the profit reconciliation, and it needs the direct method fact.
The paragraphs behind this answer
- AASB 107 paragraph Aus6.1: Interest and dividends received may be operating cash flows
- AASB 107 paragraph Aus20.1: Start the indirect method at the profit or loss total when there is no operating subtotal
- AASB 107 paragraph Aus20.2: Reconcile operating cash flows to net cost of services where that measure is highlighted
- AASB 107 paragraph Aus34D.1: Interest paid, interest received and dividends received may be operating
- AASB 1039 paragraph 21: Align the concise report reconciliation wording
- AASB 1054 paragraph 16: Reconcile net operating cash flow to the right profit figure
Questions
Does the reconciliation always start at profit or loss?
Only where the entity has no operating profit or loss subtotal. An entity that presents the subtotal reconciles to it.
Is the change only for superannuation funds?
No. It also reaches a public sector not-for-profit that has elected the category relief and does not present the subtotal, and the net cost of services reconciliation reaches not-for-profits using the direct method.
Which date applies?
The amendments commence on 31 December 2027 and apply to annual periods beginning on or after 1 January 2028.