Carl Cash, CEO of Big Bucks, Inc. (BBI), goes to visit his accountant, Francis F
ID: 2594126 • Letter: C
Question
Carl Cash, CEO of Big Bucks, Inc. (BBI), goes to visit his accountant, Francis Flow, to discuss the classification of interest and dividends in BBI’s statement of cash flows. BBI currently reports using US GAAP but is considering adopting IFRS. For its current fiscal year, BBI has interest received of $500, interest paid of $250, dividends received of $1,000 and dividends paid of $700.
Carl asks Francis if BBI adopts IFRS, can BBI classify its interest and dividend amounts in the statement of cash flows consistent with its classification under US GAAP?
Explanation / Answer
Solution: Cash flow classification
Explanation: BBI can classify it's interest and dividend amounts in the statement of cash flows using IFRS as US GAAP by classifying interest paid, interest received and dividends received as 'Operating' and dividends paid as 'Financing'. Also, if BBI chooses to report using IFRS, interest and dividends must be classified in a consistent manner from period to period.
Transaction IFRS US GAAP Interest received Operating or Investing Operating Interest paid Operating or Financing Operating Dividends received Operating or Investing Operating Dividends paid Operating or Financing Financing