A group does not have a bank account. The group’s cash is the cash of the parent and each of its subsidiaries, and the group’s cash flows are theirs combined, with transactions inside the group removed.
Preparing the statement of cash flows for a group follows the same method as for a single company, but five features need attention: buying and selling subsidiaries during the year, working capital balances that arrive or leave with those subsidiaries, dividends paid to the non-controlling interest, associates, and the non-cash items that group accounting adds, such as goodwill impairment.
This topic covers each, with the workings, and ends with a complete group statement. The next topic covers group disclosures and the application of the standards in group questions.
The group statement of cash flows is examined in the consolidated question. In November Diet, 2024, Question 3 asked for a consolidated statement of cash flows by the indirect method (20 marks), with an acquisition of a subsidiary during the year, goodwill, and dividends paid to the non-controlling interest. Read the share of profit and joint arrangements first.
In 30 seconds
The group statement uses the same three sections as a single entity. For operating activities (indirect method) start with group profit before tax, add back depreciation, goodwill impairment and finance costs, deduct the share of profit of associates (non-cash) and adjust working capital using movements that exclude the balances of subsidiaries acquired or disposed of.
In investing activities show the acquisition of a subsidiary net of cash acquired (or the disposal net of cash disposed of), dividends received from associates and cash paid for associates. In financing activities show dividends paid to the parent’s shareholders and, separately, dividends paid to the non-controlling interest, found by reconciling the NCI balance.
The layout of the group statement
The layout is the same as in the earlier topics. The group-specific items are in bold below.
- Operating activities. Group profit before tax (after the share of associates), plus depreciation and amortisation, plus impairment of goodwill, plus finance costs, less investment income, less the share of profit of associates, adjusted for profit or loss on disposal, then the movements in inventories, receivables and payables excluding subsidiaries acquired or disposed of. Then interest paid and tax paid.
- Investing activities. Purchases and sales of property, plant and equipment; net cash paid to acquire a subsidiary; net cash proceeds from the disposal of a subsidiary; cash paid to acquire associates; dividends received from associates; loans to associates; interest received.
- Financing activities. Proceeds from shares and loans; repayments; lease payments; equity dividends paid by the parent; dividends paid to the non-controlling interest.
Cash and cash equivalents are defined as before. For example, an overdraft that is part of cash management is included; a deposit that requires 28 days’ notice and is held to meet working capital shortages is a cash equivalent; listed ordinary shares are not, because of the risk of a change in value. Cash spent on them is an investing flow.
Material non-cash transactions, and the cash flows of discontinued operations, are disclosed.
Acquisitions and disposals of subsidiaries
The statement records the actual cash flow: the cash paid for the shares net of the cash and cash equivalents of the subsidiary that the group gained. If P pays ₦400,000 in cash for a subsidiary that held cash of ₦30,000, the investing section shows −₦370,000.
Similarly, for a disposal the proceeds are shown net of the cash the group lost: shares sold for ₦800,000 by a group that loses control of ₦70,000 of the subsidiary’s cash give +₦730,000. Shares issued as consideration are non-cash and are disclosed, not shown.
Working capital with an acquisition
A subsidiary acquired in the year has its assets and liabilities in the closing group statement of financial position but not in the opening one. The difference between closing and opening balances therefore includes balances that came with the subsidiary and did not result from the group’s trading, so for each working capital item:
- Take the movement from opening to closing group balances.
- Deduct the subsidiary’s balances at the acquisition date (a subsidiary acquired).
- Add the subsidiary’s balances at the disposal date (a subsidiary disposed of).
For example, group inventories rose from ₦200 million to ₦330 million, but ₦60 million came with the subsidiary: the movement from trading is ₦130m − ₦60m = ₦70m, an outflow. Receivables rose from ₦150m to ₦210m, of which ₦40m came with the subsidiary: the movement is ₦20m, an outflow. Payables rose from ₦120m to ₦190m, of which ₦35m came with the subsidiary: ₦35m, an inflow.
The net adjustment is −₦70m − ₦20m + ₦35m = −₦55 million. The same logic applies to property, plant and equipment: additions exclude the subsidiary’s assets at acquisition, which are not a cash purchase by the group.
Dividends paid to the non-controlling interest
When a partly owned subsidiary pays a dividend, part of it leaves the group, to the non-controlling interest. It is shown separately, normally in financing activities. The dividend is found by reconciling the NCI balance in the statement of financial position:
- Opening NCI + the NCI’s share of total comprehensive income for the year (+ NCI arising on an acquisition) − dividends paid (balancing figure) = closing NCI.
For example, NCI was ₦300 at the start and ₦340 at the end, and its share of total comprehensive income was ₦90. The dividend paid is ₦300 + ₦90 − ₦340 = ₦50. The parent’s own dividends paid come from the group retained earnings in the usual way. The dividends that subsidiaries pay to the parent are intra-group and do not appear.
Associates
An associate is not part of the group, so its cash flows are not included except those between the group and the associate: dividends received, loans made to associates, cash paid to acquire associates and cash from sales of associates, normally in investing activities.
Because the group records its share of the associate’s profit in profit or loss, which is non-cash, it is deducted from profit before tax in the operating reconciliation. The dividend received comes from a reconciliation of the investment account:
- Opening investment + share of profit (+ share of other comprehensive income) + cash paid for new shares − dividends received = closing investment.
For example, the investment was ₦210 at the start and ₦238 at the end, with a share of profit of ₦36 and of other comprehensive income of ₦4. The dividend received is ₦210 + ₦36 + ₦4 − ₦238 = ₦12. If the closing investment had been ₦300 and the company had also bought more shares, the cash paid would be ₦300 − ₦238 = ₦62. A loan to an associate is an investing flow equal to the movement in the loan balance.
A complete group example
A group has these figures (₦ million): profit before tax ₦500 (after a share of profit of associates of ₦36 and finance costs of ₦20), depreciation ₦60, impairment of goodwill ₦15, net working capital adjustment (from above) −₦55, interest paid ₦18, tax paid ₦110. Investing: purchases of property, plant and equipment ₦150, disposal proceeds ₦30, acquisition of a subsidiary net of cash acquired ₦370, dividend from associate ₦12, cash paid for associate shares ₦62.
Financing: share issue ₦100, new loan ₦200, repayment ₦80, dividends to the parent’s shareholders ₦90, dividends to the non-controlling interest ₦50. Cash at the start was ₦150.
| Group statement of cash flows, ₦ million | |
|---|---|
| Profit before tax | 500 |
| Add finance costs, depreciation, goodwill impairment (20 + 60 + 15) | 95 |
| Less share of profit of associates | (36) |
| Working capital adjustment | (55) |
| Cash generated from operations | 504 |
| Interest paid | (18) |
| Tax paid | (110) |
| Net cash from operating activities | 376 |
| Purchase of property, plant and equipment | (150) |
| Proceeds from disposal | 30 |
| Acquisition of subsidiary, net of cash acquired | (370) |
| Dividend from associate | 12 |
| Cash paid for associate | (62) |
| Net cash used in investing activities | (540) |
| Share issue | 100 |
| New loan | 200 |
| Loan repayment | (80) |
| Dividends paid to the parent’s shareholders | (90) |
| Dividends paid to non-controlling interest | (50) |
| Net cash from financing activities | 80 |
| Net decrease in cash and cash equivalents | (84) |
| Cash and cash equivalents at the start | 150 |
| Cash and cash equivalents at the end | 66 |
The ideas in more depth
Why the acquisition is shown net of cash
The group’s cash is increased by the subsidiary’s cash on the day control is gained. The real outflow for the group is what it paid less what it received in the subsidiary’s own cash, so showing the gross payment would double count that cash.
Why the NCI dividend needs a reconciliation
The NCI figure in equity changes with its share of profit and dividends, and the dividend is not stated directly. The reconciliation isolates the cash that left the group for outside owners.
Sources and references
- International Accounting Standard (IAS) 7 Statement of Cash Flows: the cash flows of subsidiaries and other businesses and investments in associates; International Financial Reporting Standard (IFRS) 10 Consolidated Financial Statements for non-controlling interest.
These points are stated as at 5 November 2026.
Worked examples
Example 1: the NCI dividend. NCI ₦300 at the start, ₦340 at the end, share of total comprehensive income ₦90. Required: the dividend paid to the non-controlling interest.
- Reconciliation.
₦300 + ₦90 − ₦340 = ₦50.
Example 2: an associate. Investment ₦210 at the start and ₦238 at the end; share of profit ₦36; share of other comprehensive income ₦4. Required: the dividend received.
- Reconciliation.
₦210 + ₦36 + ₦4 − ₦238 = ₦12.
Example 3: an acquisition. P paid ₦400 cash for a subsidiary that held cash of ₦30. Inventories rose by ₦130, of which ₦60 came with the subsidiary. Required: the investing flow and the inventory adjustment.
- Investing.
₦400 − ₦30 = −₦370. - Inventories.
₦130 − ₦60 = ₦70 outflow.
How to answer in the exam
- Set up reconciliations for property, plant and equipment, the NCI, the investment in associates, tax and retained earnings.
- Adjust working capital for balances acquired or disposed of.
- Show the NCI dividend separately.
- Check that the closing cash agrees to the statement of financial position.
Common mistakes in the exam
- Showing the acquisition at the price paid, without deducting the cash acquired.
- Using the full movement in working capital when a subsidiary was acquired.
- Forgetting to deduct the share of profit of the associate.
- Treating the whole subsidiary dividend as paid outside the group.
- Leaving goodwill impairment out of the add-backs.
- Including shares issued as consideration as a cash flow.
Quick revision
- Acquisition: price less cash acquired. Disposal: proceeds less cash disposed of.
- Working capital: closing − opening, less balances acquired, plus balances disposed of.
- NCI dividend: opening + share of total comprehensive income − closing.
- Associates: deduct share of profit; dividend = opening + share of profit − closing; cash paid for new shares.
Practice questions
These are original questions written in the style of the Institute’s exams. Try each one before you open the answer. Section A is a recall check, because the paper itself is written.
Recall check: multiple choice
Question 1. Cash paid to acquire a subsidiary is shown:
- At the full price in operating activities
- In financing activities
- Net of the cash and cash equivalents acquired, in investing activities
- Not at all
Show the answer
C. The group gains the subsidiary’s cash.
Question 2. The share of profit of an associate is:
- Added to profit before tax
- Deducted in the operating reconciliation, because it is non-cash
- Shown in financing
- Ignored
Show the answer
B. Only dividends received are cash.
Question 3. Dividends received from an associate are shown in:
- Investing activities (or operating, consistently)
- Financing only
- Revenue
- Equity
Show the answer
A. They are a return on the investment.
Question 4. Dividends paid to the non-controlling interest are found by:
- Taking the profit
- Taking the subsidiary’s revenue
- Using the parent’s dividend
- Reconciling the NCI balance
Show the answer
D. Opening + share of total comprehensive income − closing.
Question 5. In a year with an acquisition, working capital movements are:
- Taken as the full closing less opening balances
- Adjusted to exclude the subsidiary’s balances at the acquisition date
- Ignored
- Doubled
Show the answer
B. So that only the group’s trading movement remains.
Question 6. Goodwill impairment in the indirect method is:
- Added back as a non-cash item
- Deducted
- Shown in financing
- Ignored
Show the answer
A. It reduced profit without cash.
Question 7. Cash paid to acquire shares in an associate is shown in:
- Operating
- Financing
- Investing
- Equity
Show the answer
C. It is an investment.
Question 8. A bank overdraft repayable on demand that is part of cash management is:
- A financing flow
- An investing flow
- Ignored
- Included in cash and cash equivalents
Show the answer
D. Other borrowing is financing.
Question 9. Listed ordinary shares held as an investment are:
- Cash equivalents
- Cash
- Not cash equivalents, because of the risk of changes in value
- Part of financing
Show the answer
C. Cash spent on them is investing.
Question 10. Proceeds from the disposal of a subsidiary are shown:
- Net of the cash disposed of
- At gross price
- In financing
- In equity
Show the answer
A. The group loses the subsidiary’s cash.
Section B style: written questions
Question 11 (10 marks). (a) State FOUR items that appear only in a group statement of cash flows. (4 marks) (b) Explain how the cash flow for the acquisition of a subsidiary is shown. (3 marks) (c) Explain why the share of profit of an associate is deducted. (3 marks)
Question 12 (15 marks). (a) NCI was ₦250m at the start and ₦330m at the end, with a share of total comprehensive income of ₦120m. Calculate the dividend paid to the NCI. (5 marks) (b) The investment in an associate was ₦600m and ₦640m, with a share of profit of ₦70m. Calculate the dividend received. (5 marks) (c) A subsidiary was bought for ₦900m cash; it held cash of ₦140m. Calculate the investing flow. (5 marks)
A further written question
Question 13 (20 marks). Group profit before tax is ₦300m after a share of profit of associates of ₦20m and finance costs of ₦12m. Depreciation is ₦40m, goodwill impairment ₦8m and a profit on disposal ₦4m. The net working capital adjustment is −₦25m. Interest paid is ₦11m and tax paid ₦60m. Purchases of property, plant and equipment ₦90m; proceeds of the disposal ₦14m; acquisition of a subsidiary net of cash acquired ₦150m; dividend from an associate ₦6m. Share issue ₦50m; loan repayment ₦30m; dividends to the parent’s shareholders ₦55m; dividends to the NCI ₦12m. Cash at the start ₦40m.
(a) Calculate net cash from operating activities. (8 marks) (b) Calculate net cash from investing activities. (5 marks) (c) Calculate net cash from financing activities. (4 marks) (d) Calculate the closing cash. (3 marks)
Model answers
Show the model answer to Question 11
(a) (1 mark each, any four) Cash paid to acquire a subsidiary, net of cash acquired; proceeds from the disposal of a subsidiary, net of cash disposed of; deduction of the share of profit of associates; dividends received from associates; cash paid to acquire associates; dividends paid to the non-controlling interest; add-back of goodwill impairment.
(b) It is shown in investing activities (1) as the price paid in cash (1), net of the cash and cash equivalents of the subsidiary at the acquisition date (1).
(c) The share of profit is included in profit before tax but is not a cash flow (1.5). The only cash from the associate is the dividend, which is shown separately (1.5).
Show the model answer to Question 12
(a) ₦250m + ₦120m − ₦330m = ₦40m (5).
(b) ₦600m + ₦70m − ₦640m = ₦30m (5).
(c) ₦900m − ₦140m = −₦760m (5).
Show the model answer to Question 13
(a)
- ₦300m + ₦40m − ₦20m + ₦12m + ₦8m − ₦4m = ₦336m (4).
- Less working capital ₦25m = ₦311m (1.5).
- Less interest ₦11m and tax ₦60m = ₦240m (2.5).
(b) −₦90m + ₦14m − ₦150m + ₦6m = −₦220m (5).
(c) ₦50m − ₦30m − ₦55m − ₦12m = −₦47m (4).
(d)
- Net movement ₦240m − ₦220m − ₦47m = −₦27m (1.5).
- Closing cash ₦40m − ₦27m = ₦13m (1.5).
Pathfinder on The consolidated statement of cash flows of a simple group
These are the ICAN Pathfinder questions that test this topic. ICAN owns the questions and the suggested solutions, so we point you to them and do not copy them. Open your Pathfinder, attempt each question under exam conditions, then check your answer against the notes above.
The question asks for a consolidated statement of cash flows by the indirect method, with an acquisition of a subsidiary during the year, goodwill and dividends to the non-controlling interest.
Revise first: A complete group example
Part (c) asks for cash flows from operating activities by the indirect method (5 marks). The ratio parts belong to the analysis topics.
Revise first: The layout of the group statement
Source: ICAN Pathfinder, Financial Reporting. Diets covered: Every diet in the Pathfinder, from November Diet, 2021 to May Diet, 2026, was reviewed here. The diets listed above test this topic directly..
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