Question

In: Accounting

Discuss the differences between the cash flow statement under GAAP and IFRS. What is your opinion...

Discuss the differences between the cash flow statement under GAAP and IFRS. What is your opinion on the flexibility offered under IFRS? Defend your opinion.

Solutions

Expert Solution

GAAP (ASC230) IFRS (IAS7)
1 BANK OVERDRAFT IS NEVER CONSIDERED BANK OVERDRAFT CAN BE CONSIDERED AS
AS CASH EQUIVALENTS. CHANGES IN BANK CASH EQIVALENT WHEN CIRCUMSTANCES
OVERDRAFTS ARE TREATED AS FINANCING WARRANT SUCH USE. IN MANY CASES IT IS
CASH FLOWS. INTEGRAL PART OF CASH MANAGEMENT
POLICY
2 INTEREST RECEIVED OR PAID IS CONSIDERED INTEREST RECEIVED OR PAID IS CONSIDERED
AS OPERATING ACTIVITIES AS OPERATING ACTIVITIES FOR FINANCIAL
INSTITUTIONS. FOR OTHERS INTEREST RECEIVED
CAN BE EITHER OPERATING OR INVESTING ACTIVITY
AND INTEREST PAID IS EITHER OPERATING OR
FINANCING. BUT IT SHOULD BE FOLLOWED CONSISTENTLY
3 DIVIDENDS RECEIVED ARE TREATED AS OPERA DIVIDENDS RECEIVED ARE OPERATING OR INVESTING AND
TING ACTIVITIES AND DIVIDENDS PAID FINANCING DIVIDENDS PAID ARE OPERATING OR FINANCING ACTIVITIES
BUT THE PRACTICE MUST BE CONSISTENT
FLEXIBILITY UNDER IFRS : THE OPERATIONS OF ALL ENTITIES WILL NOT BE SAME. THEY DIFFER IN NATURE OF BUSINESS, CASH
MANAGEMT PRACTICES, INVESTMENT PRACTICES. THEREFORE SOME EXTENT OF FLEXIBILITY SHOULD BE GIVEN TO ENTITIES
BUT MEASURES SHOULD BE TAKEN TO FOLLOW THEM CONSISTENTLY. IFRS DOES THE SAME.

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