Register / AASB 107 Statement of Cash Flows / AASB 107 paragraph Aus20.1
Start the indirect method at the profit or loss total when there is no operating subtotal
Under the indirect method the entity adjusts the profit or loss total presented in its statement of profit or loss, not an operating profit or loss subtotal. The adjustments cover non-cash transactions, deferrals and accruals including working capital movements, and income or expense items tied to investing or financing cash flows.
Why the paragraph exists
Without this paragraph the indirect method has no defined starting point for an entity that does not present an operating subtotal.
In practice
Build the reconciliation from the statement of profit or loss total, then add the three adjustment groups the paragraph names. Do not start from an operating subtotal that the entity no longer presents.
Tie the starting total to the published statement and to the cash flow statement in one working paper. Two statements that disagree on the starting point is the defect this paragraph prevents.
The mistake to avoid
The common mistake is to leave the old operating subtotal in the reconciliation while removing it from the income statement.
Who it binds
A superannuation entity that applies AASB 1056, or a public sector not-for-profit other than a higher education provider, that has elected the Aus47.2 relief and does not show an operating profit or loss subtotal.
What to do before the date
- Confirm the entity falls in this group: Superannuation entity and NFP public sector.
- Put the requirement into the financial statements preparation plan: start the indirect method at the profit or loss total when there is no operating subtotal.
- Open a workpaper for the first evidence item: The indirect method reconciliation showing the profit or loss total as the first line and each adjustment tied to a ledger or note amount.
Evidence an auditor will ask for
Dates
| Date | What it means | Applies to |
|---|---|---|
| 2027-12-31 | The instrument commences for this paragraph | superannuation, NFP public sector |
| 2028-01-01 | First annual periods beginning on or after this date apply the Standard | superannuation, NFP public sector |
Commencement and application are separate tests.
Cross-references
- AASB 107 paragraphs 18(b) and 20
- AASB 18 paragraph Aus47.2
- AASB 1054 paragraph 16
Record note
This is the operating cash flow reconciliation change that AASB 1039 and AASB 1054 are aligned to. It applies only where the entity uses the indirect method.
Questions
What does AASB 107 paragraph Aus20.1 require in practice?
Build the reconciliation from the statement of profit or loss total, then add the three adjustment groups the paragraph names. Do not start from an operating subtotal that the entity no longer presents.
What is the common mistake under AASB 107 paragraph Aus20.1?
The common mistake is to leave the old operating subtotal in the reconciliation while removing it from the income statement.
What evidence should be kept?
At least: The indirect method reconciliation showing the profit or loss total as the first line and each adjustment tied to a ledger or note amount.; The statement of profit or loss and the statement of cash flows side by side, tied to the same total. The kit carries each one as a row with an owner column to complete.
Source
This page is our statement of the paragraph, cited so you can check it. Read F2026L01162 on legislation.gov.au.
Source pointer: AASB 107 paragraph Aus20.1. Record retrieved 2026-10-20.