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CA Final · Financial Reporting · Ind AS 7 Statement of Cash Flows

A finance executive at Narmada Foods Ltd says: 'Under Ind AS 7 we may show dividends paid to our shareholders within operating activities, as IAS 7 permits.' Which statement about this view is correct?

The view is incorrect. Although IAS 7 allows dividends paid to be shown as an operating item, Ind AS 7 removes that option and requires dividends paid to be classified only as part of financing activities.

  1. AIt is correct, because Ind AS 7 follows IAS 7 fully on dividends paid
  2. BIt is correct only if the company is profit-making in that year
  3. CIt is incorrect, because Ind AS 7 requires dividend paid to be classified as part of financing activity onlyCorrect
  4. DIt is incorrect, because dividend paid must be shown in investing activities

Explanation

IAS 7 gives an option to classify dividend paid as an operating item. Ind AS 7 removes this option and requires dividend paid to be classified as financing activity only. So the executive's view is wrong, and investing is not the right category either.

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