Financial Reporting And Analysis MCQ - Financial Reporting And Analysis Section 1

91 Which of the following statements is correct?

Statement A is incorrect because under IFRS, interest paid is considered a financing cash flow. Statement B is incorrect because under U.S. GAAP, dividend received is considered an operating cash flow. Hence, statement C is correct.

92 In a cash flow statement prepared according to U.S. GAAP, interest paid is most likely included in which activity?

Interest paid must be categorized as an operating cash flow activity under U.S. GAAP, although it can be categorized as either an operating or financing cash flow activity under IFRS.

93 Aero Corp. prepares its financial statements using IFRS. It reports its interest payments on long-term debt as a financing activity. If the company were to switch to U.S. GAAP, the most likely effect on the cash flow statement would be a(n):

Under IFRS, interest payments can be reported either as operating or financing, but under U.S. GAAP interest payments can only be reported as operating cash flow. If interest payments are recategorized from financing to operating, cash flow from financing will increase and cashflow from operating will decrease.

94 Dividends received are most likely classified as which type of cash flow under U.S. GAAP?

Dividends received can be classified as either an operating or investing activity under IFRS, but can only be classified as an operating activity under U.S. GAAP.

95 Which of the following statements is least accurate regarding cash flow statements prepared under IFRS and U.S. GAAP?

Under U.S. GAAP, bank overdrafts are not considered part of cash and cash equivalent. They are classified as financing cash flows.