Ifrs interest paid cash flow statement

Posted: MPavel On: 23.06.2017

This often confuse students who are studying Statement of Cash Flows that what is the correct way of disclosing or presenting interest paid or received and dividends paid or received during the period. International Accounting Standard IAS 7 Statement of Cash Flows in para 31 requires:. The reason that why we do not have clear cut basis for classifying such items in statement of cash flows is that accountants and standard setters have differing opinions.

From the above discussion, we can see that even IAS 7 is not giving us a single and conclusive instruction on classification of interest and dividends paid and received. Therefore, in my opinion it will be good if we settle ourselves with a mix of conceptual understanding and industrial practice. Following are the suggestions in this regard:. Interest paid Interest paid shall be disclosed under operating activity as it is paid out of the profits generated from operations.

Also, common practice is that interest paid is treated under the heading of operating activities. Dividends paid Dividends are a bit tricky as it involves two kinds of shares i.

Dividends paid on first type of shares is basically appropriation of profits and are not considered in profit and loss determination therefore, they are most commonly disclosed under financing activity. Dividends paid on second type of shares is basically an expense and is same as interest expense which also means that such dividends are considered in profit and loss determination therefore, it would be good that if the disclosed with interest paid under operating activities.

However, common practice is that any dividends paid irrespective of type of shares are disclosed under financing activities.

How interest and dividends are disclosed in statement of cash flows? - simyviqoj.web.fc2.com

Interest and Dividends received Interest and dividends received, although considered in profit or loss determination should be disclosed under investing activities as return on investment is not applied for meeting operating expenses and even if it is applied by entity then most of time no specifications are made. Therefore, it is better to disclose it under the same headings where relevant investments are disclosed in statement of cash flows i.

The common practice for interest and dividends received is to disclose them under investing activities heading of statement of cash flows.

IFRS - IAS 7 - Cash Flow Statement

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ifrs interest paid cash flow statement

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Statement of cash flows: Key differences between U.S. GAAP and IFRSs

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Cash Flow from Operations

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ifrs interest paid cash flow statement

How interest and dividends are disclosed in statement of cash flows? By Hasaan Fazal -.

IAS 7 Para 33 states that if the entity under consideration is a financial institution then interest paid and interest and dividends received are usually classified as operating activities.

That means in case of statement of cash flows relating to financial institutions things are clear.

ifrs interest paid cash flow statement

Read on to understand more. However, in real life accountants and those responsible for preparing financial statements have total freedom to decide how a certain item should be disclosed and it is the responsibility of such accountants and responsible party to ensure that such presentation should be selected that is most appropriate i.

Following summary of options available for different items might help even further: Previous article Is audit an attestation engagement or direct reporting engagement?

IAS 7 — Statement of Cash Flows

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