What is the new starting point?
Under the indirect method, the reconciliation to operating cash flow starts from operating profit as defined by IFRS 18. Because operating profit already excludes investing and financing income and expenses, the list of adjustments is shorter: there is no longer any need to add back finance costs or deduct investment income. For the full method, see the indirect method step by step.
Where do interest and dividends go?
| Cash flow | IAS 7 before | IAS 7 as amended, general companies |
|---|---|---|
| Interest received | Operating or investing | Investing |
| Dividends received | Operating or investing | Investing |
| Interest paid | Operating or financing | Financing |
| Dividends paid | Operating or financing | Financing |
Companies with a specified main business activity, such as banks, classify each of these in a single section of the cash flow statement by reference to how the related income and expenses are classified in the income statement.
What does the new statement look like?
| Northline Telecom, CU million | Amount |
|---|---|
| Operating profit | 222 |
| Depreciation and amortisation | 190 |
| Impairment of network equipment | 12 |
| Gain on disposal of towers | (10) |
| Change in working capital | (15) |
| Income taxes paid | (45) |
| Net cash from operating activities | 354 |
| Purchase of network equipment | (260) |
| Proceeds from disposal of towers | 40 |
| Interest received | 12 |
| Dividends received | 8 |
| Net cash used in investing activities | (200) |
| Proceeds from borrowings, net of repayments | 30 |
| Repayment of lease liabilities | (60) |
| Interest paid | (66) |
| Dividends paid | (40) |
| Net cash used in financing activities | (136) |
| Net increase in cash | 18 |
Under US GAAP interest paid stays in operating activities; see IAS 7 vs ASC 230. Northline used to show interest paid of CU 66 million in operating activities. Moving it to financing raises net cash from operating activities from CU 288 million to CU 354 million, with no change in total cash. The Cash flow statement template (Excel) produces this layout from your own figures.
What should you watch for?
- Cash-based measures: free cash flow and cash conversion ratios built on operating cash flow will change if interest paid moves. Explain the change to lenders and investors.
- Covenants: check any covenant defined by reference to operating cash flow.
- Comparatives: the prior year cash flow statement is restated on the same basis.
- Not the same categories: the income statement's investing and financing categories are defined differently from the cash flow sections. Interest on lease liabilities is a financing expense and a financing cash flow, but a gain on selling equipment is operating income and an investing cash flow.
Getting ready for IFRS 18?
We help finance teams map their income statement to the new categories, restate comparatives and prepare the new disclosures.
Questions people ask
What is the starting point for the indirect cash flow statement under IFRS 18?
Operating profit, as defined by IFRS 18.
Is interest paid an operating or financing cash flow now?
Financing, for companies with no specialised main business activity.
Does IFRS 18 change total cash flow?
No. It changes the section in which some cash flows are presented, not the total.
Where do dividends paid go in the cash flow statement under IFRS 18?
In financing activities, for companies with no specified main business activity.
Sources
Every fee, date and rule on this page was taken from these official and primary sources.
- IFRS Foundation: IFRS 18 Presentation and Disclosure in Financial Statements
- Australian Accounting Standards Board: AASB 18, the Australian equivalent of IFRS 18 (full text)
- IFRS Foundation: IFRS 18, the new requirements (presentation)
Rules and fees change. If you are reading this long after October 4, 2026, confirm the figures with the source before you rely on them.
Related guides
More in IFRS 18
This guide is general information. It is not tax or legal advice for your situation.