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

Himalaya Textiles Ltd, a manufacturing company preparing financial statements under Ind AS, paid a dividend of Rs 40 lakh to its equity shareholders during the year. The CFO notes that a peer reporting under IAS 7 shows dividends paid within operating activities. How should Himalaya Textiles classify the dividend paid in its Statement of Cash Flows?

Dividend paid must be shown under financing activities. Unlike IAS 7, which allows an operating classification, Ind AS 7 permits only the financing classification, so the entity has no choice in presentation.

  1. AOperating activities, as an option available to non-financial entities
  2. BInvesting activities, because it is a return on equity capital
  3. CFinancing activities, as Ind AS 7 requires dividend paid to be classified only as financingCorrect
  4. DEither operating or financing activities, at the entity's choice if disclosed consistently

Explanation

Ind AS 7 differs from IAS 7, which allows dividend paid to be shown as an operating item. Ind AS 7 requires dividend paid to be classified as part of financing activity only (refer paragraph 34). The option to choose is therefore not available, so the operating or choice options are wrong.

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