Question:
Financial Statement Analysis Case The consolidated statement of cash flows for Telefónica, S.A. (ESP) for the year ended December 31, 2011 and 2012, is presented on page 1246.
Instructions
(a) What method does Telefónica use to prepare the operating cash flows section of its statement of cash flows? Briefly discuss how you can determine this.
(b) Telefónica reported net income of €4,403 in 2012 and €6,187 in 2011 (in millions). Briefly discuss some of the adjustments that would explain such a difference in its income and operating cash flows.
(c) IFRS requires disclosure of interest, taxes, and dividends. Briefly describe how Telefónica has complied with these requirements. What other approach could a company take to comply with the reporting requirement?
Transcribed Image Text:
(millions of euros) Cash flows from operating activities Cash received from customers 2012 2011 75,962 Cash paid to suppliers and employees (55,858) 77,222 (55,769) Dividends received 85 82 Net Interest and other financial expenses paid (2.952) (2,093) Taxes pald (2,024) (1959) Net cash from operating activities 15,213 17,483 Cash flows from Investing activities Proceeds on disposals of property, plant and equipment and Intangible assets Payments on Investments in property, plant and equipment 939 811 and Intangible assets (9,481) (9,085) Proceeds on disposals of companies, net of cash and cash equivalents disposed 1,823 4 Payments on Investments in companies, net of cash and cash equivalents acquired (37) (2,948) Proceeds on financial investments not included under cash equivalents 30 23 Payments made on financial Investments not included under cash equivalents Payments from cash surpluses not included under cash (834) (669) equivalents Government grants received Net cash used in Investing activities Cash flows from financing activities Dividends paid (318) (646) 1 13 (7.877) (12,497) (3.273) (7,567) Transactions with equity holders 656 (399) Proceeds on Issue of debentures and bonds 8,090 4,582 Proceeds on loans, borrowings and promissory notes 6,002 4,387 Cancellation of debentures and bonds (4,317) (3,235) Repayments of loans, borrowings and promissory notes (8,401) (2,680) Net cash used in financing activities (1,243) (4,912) Effect of foreign exchange rate changes on collections and payments (382) (169) Effect of changes in consolidation methods 1 10 Net Increase (decrease) In cash and cash equivalents during the year 5,712 (85) Cash and cash equivalents at January 1 4,135 4,220 Cash and cash equivalents at December 31 9,847 4,135
