Financial Reporting · Ind AS 7 Statement of Cash Flows

Subsidiaries, Associates and Joint Ventures in Cash Flows (Ind AS 7)

Updated 5 October 2026 · Fact-checked

Under Ind AS 7, cash flows from obtaining or losing control of a subsidiary or business are shown separately as investing activities, net of the cash and cash equivalents acquired or disposed of. For associates and joint ventures on the equity method, show only actual cash flows with the investee, such as dividends, advances and investments.

Understand Subsidiaries, Associates and Joint Ventures in Cash Flows

A subsidiary or business is bought or sold in one deal, but the cash flow statement must not show its assets and liabilities line by line. Ind AS 7 wants one aggregate line for obtaining control and one for losing control, both under investing activities.

The amount on that line is the cash part of the consideration, net of the cash and cash equivalents held by the subsidiary on the date control changes. Why net? Because on acquisition the subsidiary's cash comes into the group, and on disposal it leaves. The group's cash only moves by the difference. Non-cash consideration, such as shares issued or a deferred amount not yet paid, is not a cash flow. You disclose it as a non-cash transaction.

If you buy or sell shares in a subsidiary and control does not change, Ind AS 110 treats it as a transaction between owners. Ind AS 7 therefore classifies those cash flows as financing activities.

For an associate or joint venture accounted for by the equity method, or an investment at cost, report only the cash that actually moves between the investor and the investee. Examples are the purchase price of the investment, dividends received, loans and advances given or repaid. The investor's share of the investee's profit is not cash. In the indirect method, you remove it from profit before tax. For a joint operation, the operator accounts for its own share of assets, liabilities and cash flows, so those flow through the normal heads.

On top of the cash flow line, Ind AS 7 requires aggregate disclosures for control gained or lost: total consideration, the part paid or received in cash, cash held by the entity involved, and the other assets and liabilities by major category.

Key rules to remember

Acquisition of subsidiary or business: Investing outflow = Cash consideration paid − Cash and cash equivalents acquired; Show as a separate investing line. Include only consideration paid in cash in the period.
Disposal of subsidiary or business: Investing inflow = Cash consideration received − Cash and cash equivalents of the subsidiary disposed of; If cash disposed of exceeds cash received, the net amount is an outflow. Deferred consideration not yet received is excluded.
Change in ownership without loss of control: Cash paid or received for the stake = Financing activity; Applies to buying more shares from, or selling some shares to, non-controlling interests while control stays.
Equity-accounted investee in the indirect method: Operating adjustment = Profit before tax − Share of profit of associate or JV (add back share of loss); The share of profit is non-cash. Under Ind AS 7, dividends actually received are classified as investing cash flows. Interest and dividends paid are financing.
Investment in associate or JV: Cash paid to acquire or received on sale of the investment = Investing activity; Loans and advances to or from the investee follow their own nature.
Required disclosures: Total consideration; cash part; cash held by the entity; other assets and liabilities by category; Give them in aggregate, for both obtaining and losing control.

How to solve Subsidiaries, Associates and Joint Ventures in Cash Flows questions

Use this order for any question on a subsidiary, associate or joint venture in the cash flow statement.

1Identify the event: control gained, control lost, change in stake with control retained, or an equity-method or cost investment.
2Split the consideration into cash and non-cash parts. Remove shares issued, assets swapped and unpaid deferred amounts from the cash figure.
3Find the cash and cash equivalents held by the subsidiary on the date control changed. Use only cash and equivalents, not other current assets.
4Compute the net figure: cash consideration minus the subsidiary's cash. Show it as a separate investing line, as an outflow for acquisition and an inflow for disposal.
5If control is unchanged, put the cash paid or received for the stake under financing.
6For equity-method investees, take only actual cash flows: investment, dividends, loans. Remove the share of profit from operating cash flow in the indirect method.
7Add the notes: total consideration, cash portion, cash of the entity, and assets and liabilities by category. Show non-cash consideration as a non-cash transaction.
8Check for expenses such as acquisition costs. They go to profit or loss and are usually operating cash flows.

Quickest way: Net-of-cash shortcut

When to use it: Use when the question gives consideration, a cash split and the subsidiary's cash balance, and asks for one cash flow figure.

Write cash consideration only. Cross out shares and deferred amounts.
Subtract the subsidiary's cash and cash equivalents.
Label the result: positive on disposal is an inflow, positive on acquisition is an outflow.
Tag it as investing. Tag any stake change with control retained as financing.
For associates, write only dividends, loans and investment amounts. Add back share of profit as a non-cash item.

Common mistakes in Subsidiaries, Associates and Joint Ventures in Cash Flows

Showing the full purchase price as the investing outflow
Students forget the subsidiary brought cash with it.
Fix: Always deduct the cash and cash equivalents acquired from the cash consideration.
Including shares issued or deferred consideration in the cash figure
The total consideration is read as the cash paid.
Fix: Use only the cash actually paid or received in the period. Disclose the rest as non-cash.
Treating a purchase of extra shares in an existing subsidiary as investing
It looks like any other share purchase.
Fix: If control does not change, it is an equity transaction under Ind AS 110, so the cash flow is financing.
Leaving the share of profit of an associate in operating cash flow
It sits inside profit before tax and looks like income.
Fix: Deduct it in the indirect method. Show only dividends actually received.
Adding the subsidiary's cash on disposal instead of deducting it
Students mix up the direction of the adjustment.
Fix: On disposal, the group's cash leaves with the subsidiary, so subtract it from the cash received.
Showing assets and liabilities of the subsidiary acquired as separate cash flow lines
Students move balance sheet changes straight into the statement.
Fix: Use one aggregate line. Remove the effect of the acquired or disposed items from working capital changes and give the details in the notes.

Worked examples

Example 1

During the year, Alpha Ltd acquired 100% of Beta Ltd and obtained control. Consideration was ₹50,00,000 in cash and equity shares of Alpha with a fair value of ₹10,00,000. Beta held cash and cash equivalents of ₹6,00,000 on the acquisition date. Show the treatment in Alpha's consolidated cash flow statement.

Show the solution

Total consideration = ₹50,00,000 + ₹10,00,000 = ₹60,00,000.
Cash portion = ₹50,00,000. The share issue of ₹10,00,000 is non-cash.
Cash and cash equivalents acquired = ₹6,00,000.
Net investing flow = ₹50,00,000 − ₹6,00,000 = ₹44,00,000, an outflow.
Present it as a separate line under investing activities. Disclose the total consideration, the cash portion and Beta's cash, plus Beta's other assets and liabilities by major category. Disclose the share issue as a non-cash transaction.

Answer: Net cash outflow of ₹44,00,000 under investing activities. The ₹10,00,000 share issue is a non-cash transaction disclosed in the notes.

Example 2

Gamma Ltd sold its entire 70% holding in Delta Ltd and lost control. Sale consideration was ₹90,00,000, of which ₹70,00,000 was received in cash and ₹20,00,000 is receivable next year. Delta's cash and cash equivalents at the date of disposal were ₹12,00,000. What is the cash flow effect?

Show the solution

Cash received = ₹70,00,000. The ₹20,00,000 receivable is not a cash flow this year. When it is collected in a later year, it is an investing inflow (proceeds from disposal) in that year.
Cash and cash equivalents of Delta disposed of = ₹12,00,000.
Net investing flow = ₹70,00,000 − ₹12,00,000 = ₹58,00,000, an inflow.
Show it as a separate investing line. Disclose the total consideration of ₹90,00,000, the cash portion of ₹70,00,000, Delta's cash of ₹12,00,000 and Delta's other assets and liabilities by major category.
In the indirect method, any gain on disposal is included in profit before tax but is not an operating cash flow. Deduct the gain from profit before tax (or add back a loss) in the operating section. The question gives no carrying amounts, so no gain or loss figure can be computed here. The cash effect is shown only in the investing line of ₹58,00,000.

Answer: Net cash inflow of ₹58,00,000 under investing activities. The ₹20,00,000 receivable, when collected, will be shown as an investing inflow (proceeds from disposal) in the year of receipt, not as an operating flow.

Exam tips

In case-scenario MCQs, check whether the question gives the subsidiary's cash. If it does, the answer is almost always net of it.
Read the words 'obtained control' or 'lost control' carefully. If control is unchanged, the answer is a financing flow, not an investing one.
In a written answer, state the paragraph logic: aggregate, separate line, investing, net of cash. Then add the numbers.
For associates, state clearly that the share of profit is non-cash and that only dividends and other actual flows are shown.
Write the disclosure points as a short list at the end. Examiners often give marks for them.

Practice questions from Ind AS 7 Statement of Cash Flows

Subsidiaries, Associates and Joint Ventures in Cash Flows: frequently asked questions

Is acquisition of a subsidiary an investing or financing activity?

It is an investing activity. Ind AS 7 requires a separate line for the aggregate cash flows from obtaining control of subsidiaries or other businesses. The amount is net of cash and cash equivalents acquired.

How is the cash of the subsidiary treated on disposal?

You deduct it from the cash consideration received. The subsidiary's cash leaves the group on disposal, so only the net amount is the group's investing inflow. If the subsidiary's cash is more than the consideration received, the net flow is an outflow.

Where do dividends from an associate go in the cash flow statement?

Under Ind AS 7, dividends received from an associate are shown in investing activities. Under the equity method, you also remove the share of profit of the associate from operating profit, since it is non-cash.

What if I buy more shares in an existing subsidiary and control stays?

Ind AS 110 treats this as a transaction with owners, so the cash paid or received is classified as financing activity. It is not shown as an acquisition of a subsidiary under investing.