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

Himalaya Textiles Ltd, a manufacturing company, prepares its financial statements under Ind AS. During the year it paid Rs 12 lakh as interest on term loans and Rs 5 lakh as dividend to its equity shareholders. It also received Rs 3 lakh as interest on fixed deposits and Rs 2 lakh as dividend from investments in other companies. Which classification is consistent with Ind AS 7 as described in the comparison with IAS 7?

Under Ind AS 7, a non-financial entity must show interest paid and dividend paid as financing activities, and interest and dividends received as investing activities. The IAS 7 option to treat these as operating cash flows is not available in Ind AS 7.

  1. AInterest paid and dividend paid in financing activities; interest and dividend received in investing activitiesCorrect
  2. BInterest paid and interest and dividend received in operating activities; dividend paid in financing activities
  3. CInterest paid and dividend paid in operating activities; interest and dividend received in investing activities
  4. DAll four items may be classified as operating activities at the entity's option

Explanation

Ind AS 7 does not give the IAS 7 option for a non-financial entity. Interest paid goes to financing, interest and dividends received go to investing, and dividend paid is a financing item only. Option B reflects the IAS 7 option, which Ind AS 7 does not allow.

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