CS Executive · Corporate Accounting and Financial Management · Cash Flows
A company changes its policy for determining the components of cash and cash equivalents, for example by reclassifying a financial instrument earlier treated as part of its investment portfolio. How does Ind AS 7 require the effect to be reported?
Ind AS 7 requires the effect of a change in the policy for determining components of cash and cash equivalents to be reported in accordance with Ind AS 8, which deals with accounting policies, estimates and errors. It is not shown as a financing inflow or ignored.
- AIn accordance with Ind AS 8Correct
- BAs a financing activity cash inflow
- CAs an adjustment to operating activities only in the current year
- DIgnored, since classification changes have no effect on the cash flow statement
Explanation
Paragraph 47 of Ind AS 7 says the effect of any change in policy for determining components of cash and cash equivalents is reported in accordance with Ind AS 8. It is not shown as a financing flow or ignored. Treating it as an operating adjustment misapplies the paragraph.
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