Spain Cash flow statement


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Hi,

I'd be so grateful if someone could help me clarify a question that keeps raising to me.

What is the reason why the changes in the operating working capital accounts shown in a cash flow statement are not equal to the changes of the same accounts in the balance sheets?

Gracias J
 
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kirby

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One of the accounts that compose working capital is accounts receivable. Non-cash transactions can change the A/R balance. For example, a writeoff of accounts receivable is a non-cash transaction. This is one example of items that will cause the difference you are seeing.
 
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If you are looking at a group cash flow statement, in the group presentation currency, then the movement in the WC accounts needs to be stripped of the CTA (cumulative translation adjustment) so that they are stated as Local Currency movements at average FX translation rate (2.75 in my example below) and not as the difference between month start at one FX rate (2.5 in my example below) versus month end at a different closing FX rate (3 in my example below)

E.g. +/- in AR as follows (EUR = group presentation currency, LC = Local Currency)

Beginning balance :
LC 100 @ 2.5 = EUR 40

Ending balance :
LC 150 @ 3 = EUR 50

Balance Sheet Movement in EUR = +10 (-10 for cash flow)
Cash Flow Movement = LC 50 @ 2.75 (say, average period rate) = EUR -18.18

Hence, the differences between the 2 deltas : -10 versus -18.18

Don't worry, the VP of FP&A once asked me the same question !

Makes you wonder, eh ?
 
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