Statement of Cash Flows

Transcription

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2 13 Statement of Cash Flows Learning Objectives 1 2 Discuss the usefulness and format of the statement of cash flows. Prepare a statement of cash flows using the indirect method. 3 Analyze the statement of cash flows. 13-2

3 LEARNING OBJECTIVE 1 Discuss the usefulness and format of the statement of cash flows. Usefulness of the Statement of Cash Flows Provides information to help assess: 1. Entity s ability to generate future cash flows. 2. Entity s ability to pay dividends and meet obligations. 3. Reasons for difference between net income and net cash provided (used) by operating activities. 4. Cash investing and financing transactions during the period LO 1

4 Classification of Cash Flows Operating Activities Income Statement Items Investing Activities Changes in Investments and Long-Term Asset Items Financing Activities Changes in Long-Term Liabilities and Stockholders Equity Items 13-4 LO 1

5 Classification of Cash Flows Operating activities Income statement items Cash inflows: From sale of goods or services. From interest received and dividends received. Cash outflows: To suppliers for inventory. To employees for wages. To government for taxes. To lenders for interest. To others for expenses. Illustration 13-1 Typical receipt and payment classifications 13-5 LO 1

6 Classification of Cash Flows 13-6 Investing activities Changes in investments and long-term assets Cash inflows: From sale of property, plant, and equipment. From sale of investments in debt or equity securities of other entities. From collection of principal on loans to other entities. Cash outflows: To purchase property, plant, and equipment. To purchase investments in debt or equity securities of other entities. To make loans to other entities. Illustration 13-1 Typical receipt and payment classifications LO 1

7 Classification of Cash Flows Financing activities Changes in long-term liabilities and stockholders equity Cash inflows: From sale of common stock. From issuance of debt (bonds and notes). Cash outflows: To stockholders as dividends. To redeem long-term debt or reacquire capital stock (treasury stock). Illustration 13-1 Typical receipt and payment classifications 13-7 LO 1

8 Significant Noncash Activities 1. Direct issuance of common stock to purchase assets. 2. Conversion of bonds into common stock. 3. Issuance of debt to purchase assets. 4. Exchanges of plant assets. Companies report noncash activities in either a separate schedule (bottom of the statement) or separate note to the financial statements LO 1

9 Accounting Across the Organization Net What? 13-9 LO 1

10 Format of the Statement of Cash Flows Order of Presentation: 1. Operating activities. 2. Investing activities. Direct Method Indirect Method 3. Financing activities LO 1

11 Illustration 13-2 Format of statement of cash flows LO 1

12 DO IT! 1 Classification of Cash Flows Illustration: Classify each of these transactions by type of cash flow activity. 1. Issued 100,000 shares of $5 par value common stock for $800,000 cash. 2. Borrowed $200,000 from Castle Bank, signing a 5-year note bearing 8% interest. 3. Purchased two semi-trailer trucks for $170,000 cash. 4. Paid employees $12,000 for salaries and wages. 5. Collected $20,000 cash for services performed. Financing Financing Investing Operating Operating LO 1

13 LEARNING OBJECTIVE 2 Prepare a statement of cash flows using the indirect method. Three sources of information: 1. Comparative balance sheets 2. Current income statement 3. Additional information LO 2

14 Preparing the Statement of Cash Flows Three Major Steps: Illustration LO 2

15 Preparing the Statement of Cash Flows Three Major Steps: Illustration LO 2

16 Preparing the Statement of Cash Flows Three Major Steps: Illustration LO 2

17 Indirect and Direct Methods Companies favor the indirect method for two reasons: 1. Easier and less costly to prepare. 2. Focuses on differences between net income and net cash flow from operating activities LO 2

18 Indirect Method COMPUTER SERVICES COMPANY Income Statement For the Month Ended December 31, 2017 Illustration LO 2

19 Indirect Method Illustration LO 2

20 Indirect Method Illustration Additional information for 2017: 1. Depreciation expense was comprised of $6,000 for building and $3,000 for equipment. 2. The company sold equipment with a book value of $7,000 (cost $8,000, less accumulated depreciation $1,000) for $4,000 cash. 3. Issued $110,000 of long-term bonds in direct exchange for land. 4. A building costing $120,000 was purchased for cash. Equipment costing $25,000 was also purchased for cash. 5. Issued common stock for $20,000 cash. 6. The company declared and paid a $29,000 cash dividend. LO 2

21 Step 1: Operating Activities DETERMINE NET CASH PROVIDED/USED BY OPERATING ACTIVITIES BY CONVERTING NET INCOME FROM ACCRUAL BASIS TO CASH BASIS. Common adjustments to Net Income (Loss): Add back non-cash expenses (depreciation, amortization, or depletion expense). Deduct gains and add losses. Analyze changes in noncash current asset and current liability accounts LO 2

22 Step 1: Operating Activities Question Which is an example of a cash flow from an operating activity? a. Payment of cash to lenders for interest. b. Receipt of cash from the sale of capital stock. c. Payment of cash dividends to the company s stockholders. d. None of the above LO 2

23 Step 1: Operating Activities DEPRECIATION EXPENSE Although depreciation expense reduces net income, it does not reduce cash. The company must add it back to net income. Illustration 13-6 Cash flows from operating activities: Net income $ 145,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense 9,000 Net cash provided by operating activities $ 154, LO 2

24 Step 1: Operating Activities LOSS ON DISPOSAL OF EQUIPMENT Companies report as a source of cash in the investing activities section the actual amount of cash received from the sale. Any loss on disposal is added to net income in the operating section. Any gain on disposal is deducted from net income in the operating section LO 2

25 Step 1: Operating Activities LOSS ON DISPOSAL OF EQUIPMENT Cash flows from operating activities: Net income $ 145,000 Adjustments to reconcile net income to net cash Illustration 13-7 provided by operating activities: Depreciation expense 9,000 Loss on disposal of equipment 3,000 Net cash provided by operating activities $ 157, LO 2

26 Step 1: Operating Activities CHANGES TO NONCASH CURRENT ASSET When the Accounts Receivable balance decreases, cash receipts are higher than revenue earned under the accrual basis. Accounts Receivable Illustration /1/017 Balance 30,000 Sales Revenue 507,000 Receipts from customers 517,000 12/31/17 Balance 20,000 Company adds to net income the amount of the decrease in accounts receivable LO 2

27 Step 1: Operating Activities CHANGES TO NONCASH CURRENT ASSET Cash flows from operating activities: Net income $ 145,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense 9,000 Loss on disposal of equipment 3,000 Decrease in accounts receivable 10,000 Net cash provided by operating activities $ 167,000 Illustration LO 2

28 Step 1: Operating Activities CHANGES TO NONCASH CURRENT ASSET When the Inventory balance increases, the cost of merchandise purchased exceeds the cost of goods sold. Inventory 1/1/17 Balance 10,000 Purchases 155,000 Cost of goods sold 150,000 12/31/17 Balance 15,000 Cost of goods sold does not reflect cash payments made for merchandise. The company deducts from net income this inventory increase LO 2

29 Step 1: Operating Activities CHANGES TO NONCASH CURRENT ASSET Cash flows from operating activities: Net income $ 145,000 Adjustments to reconcile net income to net cash Illustration 13-9 provided by operating activities: Depreciation expense 9,000 Loss on disposal of equipment 3,000 Decrease in accounts receivable 10,000 Increase in inventory (5,000) Net cash provided by operating activities $ 162, LO 2

30 Step 1: Operating Activities CHANGES TO NONCASH CURRENT ASSET When the Prepaid Expense balance increases, cash paid for expenses is higher than expenses reported on an accrual basis. The company deducts the increase from net income to arrive at net cash provided by operating activities. If prepaid expenses decrease, reported expenses are higher than the expenses paid LO 2

31 Step 1: Operating Activities CHANGES TO NONCASH CURRENT ASSET Cash flows from operating activities: Net income $ 145,000 Adjustments to reconcile net income to net cash provided by operating activities: Illustration 13-9 Depreciation expense 9,000 Loss on disposal of equipment 3,000 Decrease in accounts receivable 10,000 Increase in inventory (5,000) Increase in prepaid expenses (4,000) Net cash provided by operating activities $ 158, LO 2

32 Step 1: Operating Activities CHANGES IN CURRENT LIABILITIES When Accounts Payable increases, the company received more in goods than it actually paid for. The increase is added to net income to determine net cash provided by operating activities. When Income Tax Payable decreases, the income tax expense reported on the income statement was less than the amount of taxes paid during the period. The decrease is subtracted from net income to determine net cash provided by operating activities LO 2

33 Step 1: Operating Activities CHANGES IN CURRENT LIABILITIES Cash flows from operating activities: Net income $ 145,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense 9,000 Loss on disposal of equipment 3,000 Decrease in accounts receivable 10,000 Increase in inventory (5,000) Increase in prepaid expenses (4,000) Increase in accounts payable 16,000 Decrease in income taxes payable (2,000) Net cash provided by operating activities $ 172,000 Illustration LO 2

34 Step 1: Operating Activities Summary of Conversion to Net Cash Provided by Operating Activities Indirect Method Illustration LO 2

35 Step 2: Investing and Financing Activities Company purchased land of $110,000 by issuing long-term bonds. This is a significant noncash investing and financing activity that merits disclosure in a separate schedule. 1/1/17 Balance 20,000 Issued bonds 110,000 12/31/17 Balance 130,000 Land Bonds Payable 1/1/17 Balance 20,000 For land 110,000 12/31/17 Balance 130, LO 2

36 Step 2: Investing and Financing Activities Partial statement Illustration Net cash provided by operating activities 172,000 Cash flows from investing activities: Purchase of building (120,000) Purchase of equipment (25,000) Sale of equipment 4,000 Net cash used by investing activities (141,000) Cash flows from financing activities: Issuance of common stock 20,000 Payment of cash dividends (29,000) Net cash used by financing activities (9,000) Net increase in cash 22,000 Cash at beginning of period 33,000 Cash at end of period $ 55,000 Disclosure: Issuance of bonds to purchase land $ 110, LO 2

37 Step 2: Investing and Financing Activities From the additional information, the company acquired an office building for $120,000 cash. This is a cash outflow reported in the investing section. 1/1/17 Balance 40,000 Office building 120,000 12/31/17 Balance 160,000 Building LO 2

38 Step 2: Investing and Financing Activities Partial statement Illustration Net cash provided by operating activities 172,000 Cash flows from investing activities: Purchase of building (120,000) Purchase of equipment (25,000) Sale of equipment 4,000 Net cash used by investing activities (141,000) Cash flows from financing activities: Issuance of common stock 20,000 Payment of cash dividends (29,000) Net cash used by financing activities (9,000) Net increase in cash 22,000 Cash at beginning of period 33,000 Cash at end of period $ 55,000 Disclosure: Issuance of bonds to purchase land $ 110, LO 2

39 Step 2: Investing and Financing Activities The additional information explains that the equipment increase resulted from two transactions: (1) a purchase of equipment of $25,000, and (2) the sale for $4,000 of equipment costing $8,000. Equipment Illustration /1/17 Balance 10,000 Purchase 25,000 Equipment sold 8,000 12/31/17 Balance 27,000 Journal Entry Cash 4,000 Accumulated Depreciation 1,000 Loss on Disposal of Equipment 3,000 Equipment 8, LO 2

40 Statement of Cash Flows Indirect Method Illustration Cash flows from operating activities: Net income $ 145,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense 9,000 Loss on disposal of equipment 3,000 Decrease in accounts receivable 10,000 Increase in inventory (5,000) Increase in prepaid expenses (4,000) Increase in accounts payable 16,000 Decrease in income taxes payable (2,000) Net cash provided by operating activities 172,000 Cash flows from investing activities: Purchase of building (120,000) Purchase of equipment (25,000) Sale of equipment 4,000 Net cash used by investing activities (141,000) Cash flows from financing activities: Issuance of common stock 20,000 Payment of cash dividends (29,000) Net cash used by financing activities (9,000) Net increase in cash 22,000 Cash at beginning of period 33,000 Cash at end of period $ 55,000 LO 2

41 Step 2: Investing and Financing Activities The increase in common stock resulted from the issuance of new shares. 1/1/17 Balance 50,000 Shares sold 20,000 12/31/17 Balance 70,000 Common Stock LO 2

42 Step 2: Investing and Financing Activities Partial statement Illustration Net cash provided by operating activities 172,000 Cash flows from investing activities: Purchase of building (120,000) Purchase of equipment (25,000) Sale of equipment 4,000 Net cash used by investing activities (141,000) Cash flows from financing activities: Issuance of common stock 20,000 Payment of cash dividends (29,000) Net cash used by financing activities (9,000) Net increase in cash 22,000 Cash at beginning of period 33,000 Cash at end of period $ 55,000 Disclosure: Issuance of bonds to purchase land $ 110, LO 2

43 Step 2: Investing and Financing Activities Retained earnings increased $116,000 during the year. This increase can be explained by two factors: (1) Net income of $145,000 increased retained earnings, and (2) Dividends of $29,000 decreased retained earnings. Retained Earnings Dividends 29,000 1/1/17 Balance 48,000 Net income 145,000 12/31/17 Balance 164, LO 2

44 Statement of Cash Flows Indirect Method Illustration Cash flows from operating activities: Net income $ 145,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense 9,000 Loss on disposal of equipment 3,000 Decrease in accounts receivable 10,000 Increase in inventory (5,000) Increase in prepaid expenses (4,000) Increase in accounts payable 16,000 Decrease in income taxes payable (2,000) Net cash provided by operating activities 172,000 Cash flows from investing activities: Purchase of building (120,000) Purchase of equipment (25,000) Sale of equipment 4,000 Net cash used by investing activities (141,000) Cash flows from financing activities: Issuance of common stock 20,000 Payment of cash dividends (29,000) Net cash used by financing activities (9,000) Net increase in cash 22,000 Cash at beginning of period 33,000 Cash at end of period $ 55,000 LO 2

45 Step 2: Investing and Financing Activities Question Which is an example of a cash flow from an investing activity? a. Receipt of cash from the issuance of bonds payable. b. Payment of cash to repurchase outstanding capital stock. c. Receipt of cash from the sale of equipment. d. Payment of cash to suppliers for inventory LO 2

46 Step 3: Net Change in Cash Compare the net change in cash on the Statement of Cash Flows with the change in the cash account reported on the Balance Sheet to make sure the amounts agree. Illustration LO 2

47 13-47 Accounting Across the Organization Burning Through Our Cash Box (cloud storage), Cyan (game creator), Fireeye (cyber security), and Mobile Iron (mobile security of data) are a few of the tech companies that recently have issued or are about to issue stock to the public. Investors now have to determine whether these tech companies have viable products and high chances for success. An important consideration in evaluating a tech company is determining its financial flexibility its ability to withstand adversity if an economic setback occurs. One way to measure financial flexibility is to assess a company s cash burn rate, which determines how long its cash will hold out if the company is expending more cash than it is receiving. Fireeye, for example, burned cash in excess of $50 million in But the company also had over $150 million as a cash cushion, so it would take over 30 months before it runs out of cash. And even though Box has a much lower cash burn rate than Fireeye, it still has over a year s cushion. Compare that to the tech companies in 2000, when over one-quarter of them were on track to run out of cash within a year. And many did. Fortunately, the tech companies of today seem to be better equipped to withstand an economic setback. Source: Shira Ovide, Tech Firms Cash Hoards Cool Fears of a Meltdown, Wall Street Journal (May 14, 2014). LO 2

48 LEARNING OBJECTIVE 3 Analyze the statement of cash flows. Free Cash Flow Illustration Free cash flow describes the cash remaining from operations after adjustment for capital expenditures and dividends LO 3

49 Free Cash Flow Illustration Microsoft s cash flow information ($ in millions) Required: Calculate Microsoft s free cash flow. Cash provided by operating activities $21,863 Less: Expenditures on property, plant, and equipment 4,257 Dividends paid Free cash flow 7,455 $10, LO 3

50 LEARNING OBJECTIVE 4 APPENDIX 13A: Prepare a statement of cash flows using the direct method. 1. Compute net cash provided by operating activities by adjusting each item in the income statement from the accrual basis to the cash basis. 2. Companies report only major classes of operating cash receipts and cash payments. 3. For these major classes, the difference between cash receipts and cash payments is the net cash provided by operating activities LO 4

51 Step 1: Operating Activities Illustration 13A-2 Major classes of cash receipts and payments LO 4

52 Direct Method COMPUTER SERVICES COMPANY Income Statement For the Month Ended December 31, 2017 Illustration LO 4

53 Direct Method Illustration LO 4

54 Direct Method Illustration Additional information for 2017: 1. Depreciation expense was comprised of $6,000 for building and $3,000 for equipment. 2. The company sold equipment with a book value of $7,000 (cost $8,000, less accumulated depreciation $1,000) for $4,000 cash. 3. Issued $110,000 of long-term bonds in direct exchange for land. 4. A building costing $120,000 was purchased for cash. Equipment costing $25,000 was also purchased for cash. 5. Issued common stock for $20,000 cash. 6. The company declared and paid a $29,000 cash dividend. LO 4

55 Step 1: Operating Activities Cash Receipts from Customers For Computer Services, accounts receivable decreased $10,000. Accounts Receivable Illustration 13A-4 1/1/017 Balance 30,000 Sales revenue 507,000 Receipts from customers 517,000 12/31/17 Balance 20,000 Illustration 13A LO 4

56 Step 1: Operating Activities Cash Payments to Suppliers In 2017, Computer Services Company s inventory increased $5,000 and cash payments to suppliers were $139,000. Inventory Illustration 13A-7 1/1/17 Balance 10,000 Purchases 155,000 Cost of goods sold 150,000 12/31/17 Balance 15,000 Accounts Payable Illustration 13A-9 Payment to suppliers 139,000 1/1/17 Balance 12,000 Purchases 155,000 12/31/17 Balance 28, LO 4

57 Step 1: Operating Activities Cash Payments to Suppliers In 2017, Computer Services Company s inventory increased $5,000 and cash payments to suppliers were $139,000. Illustration 13A-10 Formula to compute cash payments to suppliers direct method LO 4

58 Step 1: Operating Activities Cash Payments for Operating Expenses Cash payments for operating expenses were $115,000. Illustration 13A-11 Illustration 13A LO 4

59 Step 1: Operating Activities Cash Payments for Interest In 2017, Computer Services had interest expense of $42,000. Interest Payable Cash paid for interest 42,000 1/1/17 Balance 0 Interest expense 42,000 12/31/17 Balance LO 4

60 Step 1: Operating Activities Cash Payments for Income Taxes Cash payments for income taxes were $49,000. Income Tax Payable Cash paid for taxes 49,000 1/1/17 Balance 8,000 Income tax expense 47,000 12/31/17 Balance 6,000 Illustration 13A LO 4

61 Step 1: Operating Activities Illustration 13A-16 Operating activities section of the statement of cash flows LO 4

62 Step 2: Investing and Financing Activities Increase in Equipment. (1) Equipment purchased for $25,000, and (2) equipment sold for $4,000, cost $8,000, book value $7,000. Equipment Illustration 13A-17 1/1/17 Balance 10,000 Purchases 25,000 12/31/17 Balance 27,000 Cost of equipment sold 8,000 Accumulated Depreciation Equipment sold 1,000 1/1/17 Balance 1,000 Depreciation expense 3,000 12/31/17 Balance 3, LO 4

63 Step 2: Investing and Financing Activities Increase in Equipment. (1) Equipment purchased for $25,000, and (2) equipment sold for $4,000, cost $8,000, book value $7,000. Cash 4,000 Accumulated Depreciation 1,000 Loss on Disposal of Equipment 3,000 Equipment 8, LO 4

64 Step 2: Investing and Financing Activities Increase in Land. Land increased $110,000. The company purchased land of $110,000 by issuing bonds. Significant noncash investing and financing transaction. Increase in Building. Acquired building for $120,000 cash. Investing transaction. Increase in Bonds Payable. Bonds Payable increased $110,000. The company acquired land by exchanging bonds for land. Significant noncash investing and financing transaction LO 4

65 Step 2: Investing and Financing Activities Increase in Common Stock. Increase in Common Stock of $20,000. Increase resulted from the issuance of new shares of stock. Increase in Retained Earnings. The $116,000 net increase in Retained Earnings resulted from net income of $145,000 and the declaration and payment of a cash dividend of $29,000. Financing transaction. Financing transaction (cash dividend) LO 4

66 Illustration 13A-18 Statement of cash flows, 2015 direct method LO 4

67 Step 3: Net Change in Cash Compare the net change in cash on the Statement of Cash Flows with the change in the cash account reported on the Balance Sheet to make sure the amounts agree. Illustration LO 4

68 LEARNING OBJECTIVE 5 APPENDIX 13B: Use a worksheet to prepare the statement of cash flows using the indirect method. Illustration 13B-2 Comparative balance sheets, income statement, and additional information for Computer Services Company 13-68

69 Preparing the Worksheet Illustration 13B-2 Comparative balance sheets, income statement, and additional information for Computer Services Company Additional information for 2017: 1. Depreciation expense was comprised of $6,000 for building and $3,000 for equipment. 2. The company sold equipment with a book value of $7,000 (cost $8,000, less accumulated depreciation $1,000) for $4,000 cash. 3. Issued $110,000 of long-term bonds in direct exchange for land. 4. A building costing $120,000 was purchased for cash. Equipment costing $25,000 was also purchased for cash. 5. Issued common stock for $20,000 cash. 6. The company declared and paid a $29,000 cash dividend LO 5

70 Preparing the Worksheet 1. Enter in the balance sheet accounts section the balance sheet accounts and their beginning and ending balances. 2. Enter in the reconciling columns of the worksheet the data that explain the changes in the balance sheet accounts other than cash and their effects on the statement of cash flows. 3. Enter on the cash line and at the bottom of the worksheet the increase or decrease in cash. This entry should enable the totals of the reconciling columns to be in agreement LO 5

71 Preparing the Worksheet Illustration 13B-3 Completed worksheet indirect method LO 5

72 LEARNING OBJECTIVE 6 APPENDIX 13C: Use the T-account approach to prepare a statement of cash flows. The change in cash is equal to the change in all of the other balance sheet accounts. If we analyze the changes in all of the noncash balance sheet accounts, we will explain the change in the cash account LO 6

73 Illustration 13C LO 6

74 LEARNING OBJECTIVE 7 Compare the procedures for the statement of cash flows under GAAP and IFRS. Key Points Similarities Companies preparing financial statements under IFRS must prepare a statement of cash flows as an integral part of the financial statements. Both IFRS and GAAP require that the statement of cash flows should have three major sections operating, investing, and financing along with changes in cash and cash equivalents LO 7

75 Key Points Similar to GAAP, the cash flow statement can be prepared using either the indirect or direct method under IFRS. In both U.S. and international settings, companies choose for the most part to use the indirect method for reporting net cash flows from operating activities. The definition of cash equivalents used in IFRS is similar to that used in GAAP. A major difference is that in certain situations, bank overdrafts are considered part of cash and cash equivalents under IFRS (which is not the case in GAAP). Under GAAP, bank overdrafts are classified as financing activities in the statement of cash flows and are reported as liabilities on the balance sheet LO 7

76 Key Points Differences IFRS requires that noncash investing and financing activities be excluded from the statement of cash flows. Instead, these noncash activities should be reported elsewhere. This requirement is interpreted to mean that noncash investing and financing activities should be disclosed in the notes to the financial statements instead of in the financial statements. Under GAAP, companies may present this information on the face of the statement of cash flows LO 7

77 Key Points One area where there can be substantial differences between IFRS and GAAP relates to the classification of interest, dividends, and taxes. The following table indicates the differences between the two approaches LO 7

78 Key Points Under IFRS, some companies present the operating section in a single line item, with a full reconciliation provided in the notes to the financial statements. This presentation is not seen under GAAP LO 7

79 Looking to the Future Presently, the FASB and the IASB are involved in a joint project on the presentation and organization of information in the financial statements. One interesting approach, revealed in a published proposal from that project, is that in the future the income statement and balance sheet would adopt headings similar to those of the statement of cash flows. That is, the income statement and balance sheet would be broken into operating, investing, and financing sections LO 7

80 IFRS Self-Test Questions Under IFRS, interest paid can be reported as: a) only a financing element. b) a financing element or an investing element. c) a financing element or an operating element. d) only an operating element LO 7

81 IFRS Self-Test Questions IFRS requires that noncash items: a) be reported in the section to which they relate, that is, a noncash investing activity would be reported in the investing section. b) be disclosed in the notes to the financial statements. c) do not need to be reported. d) be treated in a fashion similar to cash equivalents LO 7

82 IFRS Self-Test Questions In the future, it appears likely that: a) the income statement and balance sheet will have headings of operating, investing, and financing, much like the statement of cash flows. b) cash and cash equivalents will be combined in a single line item. c) the IASB will not allow companies to use the direct approach to the statement of cash flows. d) None of the above LO 7

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