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

Kaveri Engineering Ltd, a non-financial company, paid Rs 8 lakh as interest on its term loan and received Rs 3 lakh as interest on fixed deposits with a bank during the year. Under Ind AS 7, how should these two items be classified in the statement of cash flows?

Interest paid of Rs 8 lakh goes to financing activities and interest received of Rs 3 lakh goes to investing activities. Ind AS 7 removes the IAS 7 option for non-financial entities to show these as operating cash flows, so no choice exists.

  1. ABoth as operating activities
  2. BInterest paid as operating and interest received as investing
  3. CInterest paid as financing and interest received as investingCorrect
  4. DInterest paid as financing and interest received as financing

Explanation

For entities other than financial entities, IAS 7 gives an option to treat interest paid and interest and dividends received as operating. Ind AS 7 gives no such option and requires interest paid to be shown in financing activity and interest received in investing activity (paragraph 33). Hence the options showing operating treatment are wrong.

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