Cash Flow Series, Part I: 2-dimensional vs 3-dimensional

1. Cash Flow Series, Part I: 2-dimensional vs 3-dimensional How to Make Your Data Stand Out August 17, 2018 Matt Spencer

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8. Overview

9. Agenda • Cash Flow Primer • 2D vs. 3D – How do the approaches, input, and outputs differ? • 2D Approach • Summary / Ideal Candidates • 2D Example #1 • 2D Example #2 • 3D Approach • Summary / Ideal Candidates • 3D Example #1 • 3D Example #2 • Comparison Grid

10. Cash Flow Primer

11. Cash Flow Statement – What is it? Definition – The financial statement that presents the sources and uses of cash during the specified reporting period Beginning Cash $100,000 Net cash from operating activities 85,000 Cash used in investing activities (10,000) Cash used in financing activities (25,000) Net increase in cash 50,000 Ending cash $150,000

12. Cash Flow Statement Topics • Operating Activity • Direct vs. Indirect Methods • Investing Activity • Financing Activity • Translation –to keep things clean, our examples will assume all USD – tune in next week for non-cash items and CTA!

13. Cash Flow Statement – Operating Activity Beginning Cash $100,000 Net cash from operating activities 85,000 Cash used in investing activities (10,000) Cash used in financing activities (25,000) Net increase in cash 50,000 Ending cash $150,000

14. Cash Flow Statement – Operating Activity • Definition – Cash inflows and outflows that relate directly to the company’s day-to-day activities Cash flows from operating activities Net Income 150,000 Adjustments to reconcile earnings to cash Depreciation 25,000 Amortization 10,000 Changes in assets and liabilities Accounts receivable (60,000) Inventory (15,000) Accounts payable (25,000) Net cash from operating activities 85,000

15. Operating Cash Flow – Direct vs. Indirect **Only for Operating section – no difference for Investing or Financing** • Direct: Directly calculating your operating cash flow using specific known activity – ground-up approach • Indirect: Indirectly calculating your operating cash flow by backing into an amount – identifiable items approach • 99% of companies use indirect – imagine Apple or GE trying to calculate a direct cash flow tracking every cash inflow and outflow at a consolidated level Net Income + / - Noncash Inc / Exp + / - Change in Current Assets = Operating Cash Flow Cash from customers - Cash to suppliers - Pay to employees +/- … = Operating Cash Flow

16. Cash Flow Statement – Investing Activity Beginning Cash $100,000 Net cash from operating activities 85,000 Cash used in investing activities (10,000) Cash used in financing activities (25,000) Net increase in cash 50,000 Ending cash $150,000

17. Cash Flow Statement – Investing Activity • Definition – Cash used in and generated from the purchase and sale of investments and long term assets Cash flows from investing activities Purchases of PPE (50,000) Cash from sales of PPE 48,000 Purchases of investments (8,000) Cash used in investing activities (10,000)

18. Cash Flow Statement – Financing Activity Beginning Cash $100,000 Net cash from operating activities 85,000 Cash used in investing activities (10,000) Cash used in financing activities (25,000) Net increase in cash 50,000 Ending cash $150,000

19. Cash Flow Statement – Financing Activity • Definition – Transactions with owners/shareholders and debtholders – those with a direct financial interest in the company Cash flows from financing activities Issuance of debt 80,000 Payments on debt (90,000) Payments of dividends (15,000) Cash used in financing activities (25,000)

20. Cash Flow Statement – Recap Definition – The financial statement that presents the sources and uses of cash during the specified reporting period Beginning Cash $100,000 Net cash from operating activities 85,000 Cash used in investing activities (10,000) Cash used in financing activities (25,000) Net increase in cash 50,000 Ending cash $150,000

21. Cash Flow 2D vs. 3D - Introduction

22. 2D vs. 3D - Overview • What are the D’s, what do they represent? • The different Dimensions provide us with details around the activity shown in the cash flow statement • 1st D is the account dimension (most of the time), other 2 typically in custom dimensions • 1st Dimension – Account • 2nd Dimension – Input vs. Calculated identifier • 3rd Dimension – Related balance sheet accounts • 2D uses the first 2 dimensions to report GAAP CF accounts, 3D adds the balance sheet detail

23. 2D – Account and Input Type

24. 2D – Ideal Candidates • Higher sensitivity to calculation times/logic complexity • Less focus on cash flow statement analysis – or at least out of the system • Desire for application simplicity – less dimensions used • Need to restrict cash flow accounts from adjustments – depreciation, etc. • No or few roll forwards in the application

25. 2D – Application Contents • Account dimension would be set up with GAAP cash flow accounts • Custom dimension would have some type of input vs. calculated member • We want this because… • Rules to populate the calculated members CFTot Total Cash Flow Activity CFCalc Calculated Cash Flow Amounts CFAdj Input Cash Flow Amounts CashFlow CF_NetIncrDecrCash CF_OperatingActivities CF_FinancingActivities CF_InvestingActivities CFX_Cash CF_BegCash CF_EndCash

26. 2D - Automation • Many lines can be populated from financial statements, specifically operating activities: • For these items, the logic would set the cash flow account for Net Income equal to the value that is in the income statement account. Balance sheet accounts would be prior period less current period, or vice versa YTD net income from the income statementCF Net Income CF Depreciation CF Net Change AR CF Net Change Inventory CF Net Change AP CF Net Change Def Taxes YTD depreciation from the Income Statement Prior Dec less current period AR Prior Dec less current period Inventory Current period less prior Dec AP Prior Dec less current period deferred taxes

27. 2D – Typical Reporting Beginning Cash Balance 100,000$ Cash flows from operating activities Net Income 150,000 Adjustments to reconcile earnings to cash Depreciation 25,000 Amortization 10,000 Changes in assets and liabilities Accounts receivable (60,000) Inventory (15,000) Accounts payable (25,000) Net cash from operating activities 85,000 Cash flows from investing activities Purchases of PPE (50,000) Cash from sales of PPE 48,000 Purchases of investments (8,000) Cash used in investing activities (10,000) Cash flows from financing activities Issuance of debt 80,000 Payments on debt (90,000) Payments of dividends (15,000) Cash used in financing activities (25,000) Ending Cash Balance 150,000$

28. 2D – Example #1 – Account Prefix Approach • Company profile • International public pharmaceutical company • 10,000 Employees • $4B+ in Revenue • Metadata • Account dimension for GAAP cash flow accounts • Custom dimension for calculated vs. input values • Logic • Activity is sourced based on account prefix

29. CF_NET_CHANGE Net increase (decrease) in cash and cash equivalents CF_OPERATING Cash Flow s From (For) Operating Activities CFP_NET_INC Net income CF_ADJ_RECON_NETINC Adjustments to derive cash flow s CFP_WRITEOFF_R_D Write-off of in-process research and development CF_RESTRUCT_EXP Restructuring expense CF_IMPAIRMENT Asset impairment CFR_NET_GDWLL_IMPAIRMENT Net goodw ill impairment CF_GAIN_LOSS Gain (loss) CFR_INVST_SEC_REAL_GAIN_LOSS Investment securities realized gain (loss) CF_OTHER_GAIN_LOSS Other gain (loss) CF_OTHER_NON_CASH_ADJ Other non cash adjustments CF_DEPR_AMORT Depreciation and amortization CFR_NET_PPE_DEPRECIATION Depreciation CFR_NET_INTANGIBLE_AMORTIZATION Amortization CF_EXC_TAX_BENEF_STK Excess tax benefit of stock transactions CF_DEF_TXS Deferred income taxes CFB_CURR_DEF_TX_AST Current deferred income tax assets CFB_NC_DEF_TX_AST Non current deferred tax assets 2D – Example #1 – Metadata – Account **Take note of the prefixes, we’ll talk about those in a minute

30. 2D – Example #1 – Metadata – Account • 4 types of account prefixes • CF_ : Input accounts – manually entered into HFM via template or some other method • CFP_ : YTD activity pulled from the P&L (income statement) • CFB_ : YTD change pulled from the Balance Sheet • CFR_ : YTD activity pulled from Roll Forwards • The prefixes on these accounts will drive which rules apply to the account • All accounts marked “N” for “is calculated” attribute – that is driven by the Custom1 input type attribute – discussed next

31. 2D – Example #1 – Metadata – Data Type • For the data type, or input vs. calculated designation, these members are stored in the Custom1 dimension. Any custom dimension can be used, but this type of activity fits best in a dimension where you don’t need to see other detail for cash flow activity. In this case, C1 also holds the company’s roll forwards Is Calculated CF_Total Cash Flow Total N CF_Calc Cash Flow Calculation Y CF_Adj Cash Flow Adjustments N CF_Non_Cash_Adj Cash Flow Non Cash Adjustments N CF_Derivatives Cash Flow Adjustments - Derivatives N CF_Post_Retire Cash Flow Adjustments - Post Retirement N CF_LT_Investments Cash Flow Adjustments - LT Investments N CF_Def_Tax_Reclass Cash Flow Adjustments - Def Tax Reclass N CF_FIN48 Cash Flow Adjustments - FIN48 N CF_Stock_Options Cash Flow Adjustments - Stock Options N CF_Other_Adj Cash Flow Other Adjustments N Member Name Description No manual adj. allowed!

32. 2D – Example #1 - Logic • To populate the cash flow accounts, the rules look at the cash flow account member names, which are delimited by an underscore • Example 1 – CFP_NET_INC • Example 2 – CFB_NC_DEF_TX_AST • Example 3 – CFR_NET_GDWLL_IMPAIRMENT “CFP” accounts pull YTD activity The text after the first “_” tells the rule which account to source data from “CFB” accounts pull YTD change The text after the first “_” tells the rule which account to source data from “CFR” tells the rule to go pull YTD roll forward activity The text after the first “_” tells the rule which C1 roll forward member to source the data from

33. CF_NET_CHANGE Net increase (decrease) in cash and cash equivalents CF_OPERATING Cash Flow s From (For) Operating Activities CFP_NET_INC Net income CF_ADJ_RECON_NETINC Adjustments to derive cash flow s CFP_WRITEOFF_R_D Write-off of in-process research and development CF_RESTRUCT_EXP Restructuring expense CF_IMPAIRMENT Asset impairment CFR_NET_GDWLL_IMPAIRMENT Net goodw ill impairment CF_GAIN_LOSS Gain (loss) CFR_INVST_SEC_REAL_GAIN_LOSS Investment securities realized gain (loss) CF_OTHER_GAIN_LOSS Other gain (loss) CF_OTHER_NON_CASH_ADJ Other non cash adjustments CF_DEPR_AMORT Depreciation and amortization CFR_NET_PPE_DEPRECIATION Depreciation CFR_NET_INTANGIBLE_AMORTIZATION Amortization CF_EXC_TAX_BENEF_STK Excess tax benefit of stock transactions CF_DEF_TXS Deferred income taxes CFB_CURR_DEF_TX_AST Current deferred income tax assets CFB_NC_DEF_TX_AST Non current deferred tax assets 2D – Example #1 – Output YTD activity for NET_INC YTD activity for NET_GDWLL_IM PAIRMENT YTD change in NC_DEF_TX_AST

34. 2D – Example #2 – User Defined Approach • Company profile • Public manufacturing company • $10B+ in Revenue • Metadata • Account dimension for GAAP cash flow accounts • Custom dimension for calculated vs. input values • Logic • Activity is sourced based on a User Defined Field (UD1)

35. 2D – Example #2 – Metadata - Account The UserDefined1 defines which P&L or Balance Sheet account will be the source of data for the cash flow account The Account Type of the data source account is then referenced to determine if YTD activity or change will be populated to the cash flow account CashFlow CF_NetIncrDecrCash CF_OperatingActivities CF_TotalNoncashItems CF_DeprExp CF_AmortExp CFP_Impairment CFP_910000 CFP_6121800 CF_NonCashIntExp CF_GainLossSaleofPPE CF_ChgAssetsLiabsNetOfAcq CF_AR CF_Inv CF_AP CF_AccrSalBen CF_OthAccSalBen CF_OthAssetsLiabs

36. 2D – Example #2 – Metadata – Data Type • Similar to the previous example, this approach also uses a custom dimension to differentiate between calculated and inputted cash flow amounts

37. 2D – Example #2 - Logic • The rules to populate the cash flow loop through all base cash flow accounts and perform the following steps: • 1. Look at the UD1 for the cash flow account • 2. Look at the account type for each UD1 member • 3. For assets and liabilities, populate the YTD change to the CF account, for revenue and expense, use YTD activity

38. 2D – Example #2 – Output CashFlow CF_NetIncrDecrCash CF_OperatingActivities CF_TotalNoncashItems CF_DeprExp CF_AmortExp CFP_Impairment CFP_910000 CFP_6121800 CF_NonCashIntExp CF_GainLossSaleofPPE CF_ChgAssetsLiabsNetOfAcq CF_AR CF_Inv CF_AP CF_AccrSalBen CF_OthAccSalBen CF_OthAssetsLiabs The activity in these cash flow accounts would be driven by the UD field for each member

39. 3D – Account, Data Type, and Balance Sheet Association

40. 3D – Ideal Candidates • Less sensitivity to calculation times • Higher focus on cash flow statement analysis and determining the drivers for cash flow activity • Need to restrict cash flow accounts from adjustments – depreciation, etc. • Many rollforwards, or desire to be able to roll forward the full balance sheet.

41. 3D – Application Contents • Account dimension would be set up with GAAP cash flow accounts • Custom dimension would have some type of input vs. calculated member • Additional custom dimension to reflect which balance sheet accounts drive cash flow activity CFTot Total Cash Flow Activity CFCalc Calculated Cash Flow Amounts CFAdj Input Cash Flow Amounts CashFlow CF_NetIncrDecrCash CF_OperatingActivities CF_FinancingActivities CF_InvestingActivities CFX_Cash CF_BegCash CF_EndCash

42. 3D - Automation • Many lines can be populated from financial statements, specifically operating activities: • For these items, the logic would set the cash flow account for Net Income equal to the value that is in the income statement account. Balance sheet accounts would be prior period less current period, or vice versa YTD net income from the income statementCF Net Income CF Depreciation CF Net Change AR CF Net Change Inventory CF Net Change AP CF Net Change Def Taxes YTD depreciation from the Income Statement Prior Dec less current period AR Prior Dec less current period Inventory Current period less prior Dec AP Prior Dec less current period deferred taxes

43. NetCashBS CFAR CFINV CFPPEBUILDING CFPPEMACHINE CFAFSSEC CFDEBT CFAP CFRE Beginning Balance 170,000$ 100,000 200,000 500,000 250,000 - (20,000) (300,000) (900,000) Cash flows from operating activities Net Income 200,000 (200,000) Adjustments to reconcile earnings to cash Depreciation 15,000 (10,000) (5,000) Changes in assets and liabilities Accounts receivable (60,000) 60,000 Inventory (15,000) 15,000 Accounts payable (25,000) 25,000 Net cash from operating activities 115,000 Cash flows from investing activities Purchases of PPE (50,000) 30,000 20,000 Cash from sales of PPE 48,000 (48,000) Purchases of investments (8,000) 8,000 Cash used in investing activities (10,000) Cash flows from financing activities Issuance of debt 80,000 (80,000) Payments on debt (90,000) 90,000 Payments of dividends (15,000) 15,000 Cash used in financing activities (25,000) Ending Balance 250,000$ 160,000 215,000 520,000 217,000 8,000 (10,000) (275,000) (1,085,000) 3D – Typical Reporting 3D!

44. 3D – Example #1 – Member Name Approach • Company profile • Fortune 500 company • $50B+ in Revenue • Metadata • Account dimension for GAAP cash flow accounts • Custom dimension for calculated vs. input values • Custom dimension for associated balance sheet account • Logic • Activity is sourced from member names

45. 3D – Example #1 - Overview CFTTL_CASH CFAR_BAL CFINV_BAL CFPPEBUILDING CFPPEMACHINE CFAFSSEC CFAP_BAL CFDEBT CFRE BEGINBAL 450,000 100,000 200,000 250,000 300,000 - (300,000) (600,000) (400,000) CF_OPERATING (65,000) 30,000 150,000 (20,000) (30,000) - (15,000) - (50,000) CF_NETINCOME 50,000 (50,000) CF_DEPAMORT 50,000 (20,000) (30,000) CF_IMPAIRMENT - CF_GAINLOSSSALE - CF_DEFERREDTAXEXPBEN - CF_WORKINGCAPITAL (165,000) 30,000 150,000 - - - (15,000) - - CF_AR (30,000) 30,000 CF_AP 15,000 (15,000) CF_INV (150,000) 150,000 …. (298,000) 50,000 25,000 8,000 200,000 15,000 ENDBAL 87,000$ 130,000 350,000 280,000 295,000 8,000 (315,000) (400,000) (435,000)

46. 3D – Example #1 - Metadata • Account dimension: Utilized for the GAAP cash flow accounts (left column going down the page) CFTTL_CASH CFAR_BAL CFINV_BAL BEGINBAL 450,000 100,000 200,000 CF_OPERATING (65,000) 30,000 150,000 CF_NETINCOME 50,000 CF_DEPAMORT 50,000 CF_IMPAIRMENT - CF_GAINLOSSSALE - CF_DEFERREDTAXEXPBEN - CF_WORKINGCAPITAL (165,000) 30,000 150,000 CF_AR (30,000) 30,000 CF_AP 15,000 CF_INV (150,000) 150,000 …. (298,000) ENDBAL 87,000$ 130,000 350,000

47. CFTTL_CASH CFAR_BAL CFINV_BAL CFPPEBUILDING CFPPEMACHINE BEGINBAL 450,000 100,000 200,000 250,000 300,000 CF_OPERATING (65,000) 30,000 150,000 (20,000) (30,000) CF_NETINCOME 50,000 CF_DEPAMORT 50,000 (20,000) (30,000) CF_IMPAIRMENT - CF_GAINLOSSSALE - CF_DEFERREDTAXEXPBEN - CF_WORKINGCAPITAL (165,000) 30,000 150,000 - - CF_AR (30,000) 30,000 CF_AP 15,000 CF_INV (150,000) 150,000 …. (298,000) 50,000 25,000 ENDBAL 87,000$ 130,000 350,000 280,000 295,000 3D – Example #1 - Metadata • Custom2 dimension: utilized for the balance sheet category associated with the cash flow account (the part going across the top)

48. 3D – Example #1 - Metadata • Custom4 dimension: utilized for the cash flow data type Member Name Description Is Calculated CF_DATA Total Cash Flow Data N CF_CALC Calculated Cash Flow Data Y CF_ADJUST Cash Flow Manual Inputs N No manual adj. allowed!

49. 3D – Beginning Balance CFTTL_CASH CFAR_BAL CFPPEMACHINE CFAP_BAL BEGINBAL 450,000 100,000 300,000 (300,000) CF_OPERATING (65,000) 30,000 (30,000) (15,000) CF_NETINCOME 50,000 If right 4 characters are _BAL, then beginning balance is taken from the BS member between “CF” and “BAL”. Asset beginning balances are the positive amount from last period of prior year Liability beginning balances are the negative amount from last period prior year If no _BAL in the name, then beginning balance is taken from the member after “CF”

50. 3D – Ending Balance CFTTL_CASH CFAR_BAL CFPPEMACHINE CFAP_BAL CF_AR (30,000) 30,000 CF_AP 15,000 (15,000) CF_INV (150,000) …. (298,000) 25,000 ENDBAL 87,000$ 130,000 295,000 (315,000) If right 4 characters are _BAL, then ending balance is taken from the BS member between “CF” and “BAL”. Asset ending balances are the positive amount from the current period Liability ending balances are the negative amount from the current period If no _BAL in the name, then ending balance is taken from the member after “CF”

51. 3D – Balance Sheet Movement For C2 members ending in _BAL, the amount for the movement member will be populated from the difference between the beginning and ending balance. 1. Members ending in _BAL are populated to a member list 2. Members in that member list are looped through and the difference between the ending and beginning balance is populated to the CF accounts ending in the member that is between the “CF” and “_BAL” pieces of the member 2 name CFAR_BAL CFAP_BAL BEGINBAL 100,000 (300,000) CF_OPERATING 30,000 (15,000) CF_AR 30,000 CF_AP (15,000) …. ENDBAL 130,000 (315,000) (315,000) End Bal - (300,000) Begin Bal (15,000) Change130,000 End Bal - 100,000 Begin Bal 30,000 Change

52. 3D – P&L Activity CFTTL_CASH CFAR_BAL CFINV_BAL CFPPEBUILDING BEGINBAL 450,000 100,000 200,000 250,000 CF_OPERATING (65,000) 30,000 150,000 (20,000) CF_NETINCOME 50,000 CF_DEPAMORT 50,000 (20,000) CF_IMPAIRMENT - CF_GAINLOSSSALE - From the P&L account: DEPAMORT_PPEBUILDING “CF_” + X = CF_DEPAMORT Cash Flow Account “CF” + X = CFPPEBUILDING Custom2 Member Note: When designing an application, it is important to think how the Balance Sheet, Income Statement, and Statement of Cash Flows will all fit together!

53. But How Do We Get To Cash?? CFTTL_CASH CFAR_BAL CFINV_BAL CFPPEBUILDING CFPPEMACHINE CFAFSSEC CFAP_BAL CFDEBT CFRE BEGINBAL 450,000 100,000 200,000 250,000 300,000 - (300,000) (600,000) (400,000) CF_OPERATING (65,000) 30,000 150,000 (20,000) (30,000) - (15,000) - (50,000) CF_NETINCOME 50,000 (50,000) CF_DEPAMORT 50,000 (20,000) (30,000) CF_IMPAIRMENT - CF_GAINLOSSSALE - CF_DEFERREDTAXEXPBEN - CF_WORKINGCAPITAL (165,000) 30,000 150,000 - - - (15,000) - - CF_AR (30,000) 30,000 CF_AP 15,000 (15,000) CF_INV (150,000) 150,000 …. (298,000) 50,000 25,000 8,000 200,000 15,000 ENDBAL 87,000$ 130,000 350,000 280,000 295,000 8,000 (315,000) (400,000) (435,000)

54. 3D – C2 Aggregation for Cash Impact CFTTL_CASH CFAR_BAL CFINV_BAL CFPPEBUILDING CFPPEMACHINE CFAFSSEC CFAP_BAL CFDEBT CFRE BEGINBAL 450,000 100,000 200,000 250,000 300,000 - (300,000) (600,000) (400,000) C2 Rollup for BEGINBAL Acct CFTTL_CASH 450,000 CFAR_BAL 100,000 CFINV_BAL 200,000 CFPPEBUILDING 250,000 CFPPEMACHINE 300,000 CFAFSSEC - CFAP_BAL (300,000) CFDEBT (600,000) CFRE (400,000) • The impact on cash is calculated by determining the offset for each of the other Balance Sheet categories • CFTTL_CASH is a parent C2 member for the rest of the Balance Sheet categories. In the attributes of each of the C2 members, you can see that the aggregation weight is set to -1 • This means that when each of the C2 members rolls up, it passes the opposite amount up to the CFTTL_CASH member

55. 3D – Example #1 – Reporting Output CFTTL_CASH CFAR_BAL CFINV_BAL CFPPEBUILDING CFPPEMACHINE CFAFSSEC CFAP_BAL CFDEBT CFRE BEGINBAL 450,000 100,000 200,000 250,000 300,000 - (300,000) (600,000) (400,000) CF_OPERATING (65,000) 30,000 150,000 (20,000) (30,000) - (15,000) - (50,000) CF_NETINCOME 50,000 (50,000) CF_DEPAMORT 50,000 (20,000) (30,000) CF_IMPAIRMENT - CF_GAINLOSSSALE - CF_DEFERREDTAXEXPBEN - CF_WORKINGCAPITAL (165,000) 30,000 150,000 - - - (15,000) - - CF_AR (30,000) 30,000 CF_AP 15,000 (15,000) CF_INV (150,000) 150,000 …. (298,000) 50,000 25,000 8,000 200,000 15,000 ENDBAL 87,000$ 130,000 350,000 280,000 295,000 8,000 (315,000) (400,000) (435,000)

56. 3D – Example #2 – User Defined Field Approach • Company profile • Multinational private conglomerate • $100B+ in Revenue • Metadata • Account dimension for balance sheet association • Custom dimension for calculated vs. input values • Custom dimension for GAAP cash flow accounts • Logic • Activity is sourced based on the User Defined Field

57. 3D – Example #2 – Report Setup CF Activity (C1) in the Rows CFTTL_CASH CFACCTREC CFINVENTORY CFPPEBUILDING CFPPEMACHINE CFAFSSEC CFAP CFDEBT CFRE CF_OPEN_BALANCE 450,000 100,000 200,000 250,000 300,000 - (300,000) (600,000) (400,000) CF_OPERATING (65,000) 30,000 150,000 (20,000) (30,000) - (15,000) - (50,000) CF_NETINCOME 50,000 (50,000) CF_DEPAMORT 50,000 (20,000) (30,000) CF_IMPAIRMENT - CF_GAINLOSSSALE - CF_DEFERREDTAXEXPBEN - CF_WORKINGCAPITAL (165,000) 30,000 150,000 - - - (15,000) - - CF_ACCTREC (30,000) 30,000 CF_ACCTPAY 15,000 (15,000) CF_INVENTORY (150,000) 150,000 …. (298,000) 50,000 25,000 8,000 200,000 15,000 Ending Balance 87,000$ 130,000 350,000 280,000 295,000 8,000 (315,000) (400,000) (435,000) BS groupings (Account) in the columns

58. 3D – Example #2 - Metadata • Account dimension – slightly different from the prior example, as this dimension houses the BS groupings and not the actual GAAP cash flow accounts

59. 3D – Example #2 - Metadata • Custom1 dimension – these are the GAAP cash flow accounts Look familiar?? UD3 from the CFACCTREC dimension The Custom1 members mirror the UD3 for the accounts, we’ll discuss more in logic

60. 3D – Example #2 - Metadata • Custom3 dimension • Similar to the other examples, this dimension is used for the data type, which will specify whether a cash flow value is calculated or input

61. 3D – Example #2 - Metadata • Account Member List • An account member list was created with all of the accounts that were determined to have in impact on the cash flow statement. This list is comprised of various cash flow balance sheet groupings and P&L accounts • The rules loop through this member list and run the cash flow logic for the accounts in the list.

62. 3D – Example #2 - Logic • Opening Balance: • The rules loop through each of the balance sheet groupings in the previously defined account member list, looks at the member after “CF” and determines if the account is an asset or liability • If the account is an asset or liability, the opening balance (C1) is set to the prioryear last period balance for the account • The ending balance is calculated the same way, but uses the current period balance

63. 3D – Example #2 - Logic • To populate the movement for each account, in the same loop that is determining whether or not the CF accounts in the C1 dimension are asset or liability, the rules populate the YTD change to the C1 activity member that is specified in the account UD3 YTD change in ACCTREC

64. CFTTL_CASH CFACCTREC CFINVENTORY CFPPEBUILDING CFPPEMACHINE CFAFSSEC CFAP CFDEBT CFRE CF_OPEN_BALANCE 450,000 100,000 200,000 250,000 300,000 - (300,000) (600,000) (400,000) CF_OPERATING (65,000) 30,000 150,000 (20,000) (30,000) - (15,000) - (50,000) CF_NETINCOME 50,000 (50,000) CF_DEPAMORT 50,000 (20,000) (30,000) CF_IMPAIRMENT - CF_GAINLOSSSALE - CF_DEFERREDTAXEXPBEN - CF_WORKINGCAPITAL (165,000) 30,000 150,000 - - - (15,000) - - CF_ACCTREC (30,000) 30,000 CF_ACCTPAY 15,000 (15,000) CF_INVENTORY (150,000) 150,000 …. (298,000) 50,000 25,000 8,000 200,000 15,000 Ending Balance 87,000$ 130,000 350,000 280,000 295,000 8,000 (315,000) (400,000) (435,000) 3D – Example #2 – BS Change Example BS groupings (Account) in the columnsCF Activity (C1) in the Rows The change in the account (in this case, ACCTREC, which is the account with the first to characters stripped off) is populated to the CF BS account, and the Custom1 specified in the account UD3

65. 3D – Example #2 - Logic • A similar process is used if the account being looped through is a revenue or expense account, but the UD members have two items in the UD Field. To the left of the ~ is the balance sheet grouping (account) the activity will apply to, the right of the ~ is the GAAP CF member (C1) the activity will apply to: Balance Sheet Grouping (Acct) GAAP CF Account C1

66. CFTTL_CASH CFACCTREC CFINVENTORY CFPPEBUILDING CFPPEMACHINE CFAFSSEC CFAP CFDEBT CFRE CF_OPEN_BALANCE 450,000 100,000 200,000 250,000 300,000 - (300,000) (600,000) (400,000) CF_OPERATING (65,000) 30,000 150,000 (20,000) (30,000) - (15,000) - (50,000) CF_NETINCOME 50,000 (50,000) CF_DEPAMORT 50,000 (20,000) (30,000) CF_IMPAIRMENT - CF_GAINLOSSSALE - CF_DEFERREDTAXEXPBEN - CF_WORKINGCAPITAL (165,000) 30,000 150,000 - - - (15,000) - - CF_ACCTREC (30,000) 30,000 CF_ACCTPAY 15,000 (15,000) CF_INVENTORY (150,000) 150,000 …. (298,000) 50,000 25,000 8,000 200,000 15,000 Ending Balance 87,000$ 130,000 350,000 280,000 295,000 8,000 (315,000) (400,000) (435,000) 3D – Example #2 – P&L Activity Example BS groupings (Account) in the columnsCF Activity (C1) in the Rows

67. 3D – Example #2 - Logic • An offset is also booked for each total Custom1 GAAP CF account member to show the impact of all of the related BS/P&L activity on the cash account • This is accomplished by taking the total of the CASHFLOWBALANCE activity and booking it to the CFTTL_CASH account with the opposite signage Flip Sign

68. CFTTL_CASH CFACCTREC CFINVENTORY CFPPEBUILDING CFPPEMACHINE CFAFSSEC CFAP CFDEBT CFRE CF_OPEN_BALANCE 450,000 100,000 200,000 250,000 300,000 - (300,000) (600,000) (400,000) CF_OPERATING (65,000) 30,000 150,000 (20,000) (30,000) - (15,000) - (50,000) CF_NETINCOME 50,000 (50,000) CF_DEPAMORT 50,000 (20,000) (30,000) CF_IMPAIRMENT - CF_GAINLOSSSALE - CF_DEFERREDTAXEXPBEN - CF_WORKINGCAPITAL (165,000) 30,000 150,000 - - - (15,000) - - CF_ACCTREC (30,000) 30,000 CF_ACCTPAY 15,000 (15,000) CF_INVENTORY (150,000) 150,000 …. (298,000) 50,000 25,000 8,000 200,000 15,000 Ending Balance 87,000$ 130,000 350,000 280,000 295,000 8,000 (315,000) (400,000) (435,000) 3D – Example #2 – Cash Impact Offset BS groupings (Account) in the columns CF Activity (C1) in the Rows

69. 2D vs. 3D – Compare and Contrast

70. 2D vs. 3D – Compare and Contrast Characteristic 2D 3D Provide Roll Forward of Cash Account + + End-User Analysis - + Auditability - + Simplicity + - Metadata Maintenance + - Visibility Into Offsetting Noncash Items - + **The “-” doesn’t indicate that something can’t be done…it just indicates that the other method may offer more solutions or be a better fit for the approach

71. Summary

72. Recap • Cash flow • Sources and uses of cash – operating, investing, and financing • 2D vs. 3D: • 2D – Just the facts: cash flow accounts and input vs. calculated • 3D – Addition balance sheet detail, additional logic • Methods to calculate – think about your metadata • What’s available? How can you set up your dimensionality? • Activity driven by member names? • Activity driven by metadata attributes? • Something else entirely?

73. Questions?

74. Upcoming Webinars • Friday, August 24– Cash Flow Series, Part 2: How to make HFM do the dirty work • Presented by Matt Spencer

75. Thank you for Attending! Today’s Presenter: Matt Spencer mspencer@finit.com Greg Barrett gbarrett@finit.com Copy of the slides or Recording: Email us for a copy of the slides or a link to the recording insights@finit.com Past webinars: www.finit.com/webinars Follow us on Twitter for updates: @Finit_Solutions

Cash Flow Series, Part I: 2-dimensional vs 3-dimensional

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