In: Accounting
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.
| 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. | ||