Video summary

Báo cáo lưu chuyển tiền tệ (Phương pháp gián tiếp)

Main summary

Key takeaways

Educational

Main ideas / lessons conveyed

  • The video continues teaching how to prepare a cash flow statement, focusing on the indirect method (gián tiếp).
  • It emphasizes that the indirect method is structured similarly to the direct method, and that both classify cash flows into three activity types:
    • Operating (business operations)
    • Investing
    • Financing
  • The key difference between direct and indirect methods is how operating cash flow is derived.
  • In the indirect method, operating cash flow is built by starting from pre-tax accounting profit and making systematic adjustments to remove:
    • non-cash items (revenues/expenses that don’t involve cash),
    • investment-related gains/losses,
    • exchange-rate revaluation effects not tied to actual cash,
    • and then adjusting for working-capital changes (receivables/payables/inventory, etc.).
  • The final goal is to compute cash received minus cash paid, yielding net cash from operating activities.

Method / step-by-step adjustments (Indirect method for Operating Cash Flow)

1) Start with “Pre-tax accounting profit” (item/code 01)

  • Line/item 01 corresponds to total pre-tax accounting profit on the cash flow statement.
  • This pre-tax profit is taken from the income statement as:

Total revenue − Total business expenses = Total pre-tax accounting profit

  • If it’s a loss, it appears as a negative amount in the cash flow statement.

2) Exclude investment-related profit/loss already included in pre-tax profit (item/code 05)

  • Pre-tax profit includes financial/investing items, but operating cash flow should exclude them.
  • The video states to exclude investment-related gains/losses from operating profit.

Sign logic for this adjustment:

  • If investment activity produced a gain (positive in pre-tax profit):
    • exclude it by subtracting (use a minus sign).
  • If investment activity produced a loss (negative in pre-tax profit):
    • exclude it by adding back (use a plus sign).

3) Remove non-cash items included in pre-tax profit (from item/code 01 → 04 → 07)

The video lists major non-cash adjustments:

(a) Depreciation of fixed assets

  • Non-cash expense included in pre-tax profit must be eliminated.
  • Use a plus sign to add back depreciation.

(b) Provisions (asset impairment / doubtful / devaluation provisions)

  • Adjust based on the change in provision balance:

    • If ending provision > beginning provision → provision increased → adjustment sign = plus

    • If ending provision < beginning provision → provision reversed/reduced → adjustment sign = minus

  • The logic is illustrated with impairment/doubtful trading securities:

    • Provision creation causes an expense during the period but no cash movement → eliminated via plus
    • Provision reversal affects revenue recognition (still non-cash) → eliminated using the corresponding sign logic

(c) Profit/loss due to exchange rate differences from revaluation (item/code 04)

  • At period end, foreign currency assets/liabilities are revalued using:
    • buying rate for asset items
    • selling rate for liability items
  • The resulting exchange gains/losses are non-cash and must be excluded from operating cash flow.

Sign logic given:

  • Gain due to exchange-rate revaluation → minus

  • Loss due to exchange-rate revaluation → plus

  • The video also notes that exchange-rate items can be transferred to specific financial/revenue/expense accounts and then excluded appropriately.

(d) Interest expense vs. interest paid

  • The video distinguishes:

    • Interest expense (typically recorded in profit/loss; included in pre-tax profit)
    • Interest paid (cash outflow used later in the statement)

  • For indirect preparation of operating cash flow:

    • Interest expense that relates to working-capital supplementation is adjusted by adding back (explained as using plus sign) when it’s not cash.

(e) “Other adjustments” (item/code 07)

  • Includes reversals/allocations to funds such as:
    • Price Stabilization Fund
    • Science and Technology Development Fund

Sign logic:

  • Reversal → minus sign

  • Additional allocation/establishment → plus sign

  • Rationale: these items may appear in accounting income/expense but may not represent operating cash flow at the time.

4) Obtain “Business profit before changes in working capital” (after adding 01 to 07)

  • After adjustments from item/code 01 through 07, the result is:
    • Operating profit before working-capital changes

5) Adjust for working-capital changes (items/code 09 → 13)

The video groups working-capital adjustments and highlights a critical rule:

  • Asset-group changes (codes like 09, 10, 12, 13)
    • Use plus sign for increases in assets (as shown by the illustrated “difference between increase and decrease” logic).
  • Liability-group changes (e.g., code 11 in their example)
    • Adjust with the opposite effect compared with asset-group adjustments.

(a) Receivables (example: accounts receivable)

  • Adjust based on the change between ending and beginning balances (conceptually increase − decrease).
  • The video explains how some decreases/additions reflect revenue recognized without cash, so the non-cash revenue component is excluded by reversing sign effects.

(b) Payables (example: accounts payable)

  • Again use ending − beginning, but apply the opposite sign effect compared with assets.
  • The explanation uses journal-entry mapping:
    • an accounting expense/non-cash portion is eliminated,
    • while the actual cash settlement component is reflected via sign correction.

6) Add separate cash-related items outside the working-capital roll

Include cash-specific items such as interest/tax and other receipts/expenses:

Interest paid (indicator code 14)

  • Refers to the cash actually paid (unlike interest expense, which is an accounting figure).
  • If interest is capitalized (for construction/unfinished assets):
    • it is treated differently and adjusted with a negative sign (as described).
  • Non-capitalized interest paid is added/removed from operating cash flow appropriately (with sign logic and journal-entry reasoning).

Corporate income tax paid

  • Cash outflow for corporate income tax made during the reporting period.
  • Adjustment uses a minus sign because it is actual cash leaving.

Other receipts and other expenses (final adjustments)

  • Other receipts = cash inflows not captured as operating revenues
    • adjustment sign = plus
  • Other expenses = cash outflows
    • adjustment sign = minus
  • Example: spending from the employee reward and welfare fund is treated as business cash flow and adjusted using the appropriate sign.

Overall “flow” of the indirect method as taught

  • Start: pre-tax accounting profit (01)
  • Exclude: investing-related items already inside pre-tax profit (05)
  • Eliminate: non-cash items (depreciation, provisions changes, exchange differences, certain interest treatment, and other fund-related adjustments) → through 04 to 07
  • Add: working-capital changes (09–13) with asset vs liability sign effects
  • Include: cash-specific items (interest paid, corporate income tax paid, other receipts/expenses)
  • Result: Net cash from operating activities (operating cash flow under indirect method)

Speakers / sources featured

  • Only one main speaker/instructor appears in the narration (no other named speakers shown in the subtitles).
  • Source references mentioned by the instructor include:
    • the prior “direct method” cash flow preparation video
    • the equity capital chapter of accounting for joint-stock companies
    • the impact of foreign currency transactions chapter

Original video