DANIEL ONG asked 1 month ago
- Net Cash provided by Operating Activities: $64,609 / $29,200 (Pg 110)
- Repayment of lease liabilities: $30,443 / $28,147 (Pg 110)
- Interest Income: $12,271 / $1,816
- Finance charges: $1,949 / $2,633
- I still don't fully understand why repayment of lease liabilities should be taken into account and other items are excluded?
- Since the company has only 1 year of debt servicing ratio (assuming cash flows from operating activities has to be adjusted), this company has passed step 4, right?
Rusmin Ang Staff answered 1 month ago
Hi Daniel,
You are doing well! SIAEC passed.
You can adjust for lease liabilities and deduct it off from the cashflow statement but since SIAEC is already getting more interest income than expenses, we can simply put it as a pass. You may find it difficult to keep on adjusting lease liability item over time because some companies may not disclose the lease liability portion and simply lump everything inside the depreciation. In the case of SIAEC, we can still get it from payment of lease liability in their cashflow from financing activities. So I would suggest to keep it simple and just take the cashflow from operation activities since IFRS 16 only affect certain industries, not all.
We added the dividends from associates to cashflow from operating activities because accounting wise, SIAEC only record s the dividends portion since these are classified as investment activities. We only need to make cashflow adjustment for those companies that have a lot of smaller stakes in JV or sizable investments that pay regular dividends. SIAEC, CKI are the two that I can remember but most companies operate under a more straighforward structure. In the case of Sheng Siong, they do not have a lot of investment here and there. So cashflow from operating activities is very clean until the changes of IFRS 16.
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