Financial Reporting And Analysis - Financial Reporting And Analysis Section 1
91. Which of the following statements is correct?
- Option : C
- Explanation : 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.
- Option : A
- Explanation : 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.
- Option : C
- Explanation : 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?
- Option : C
- Explanation : 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.
- Option : C
- Explanation : Under U.S. GAAP, bank overdrafts are not considered part of cash and cash equivalent. They are classified as financing cash flows.
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