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

Kaveri Engineering Ltd is a non-financial company reporting under Ind AS. During the year it paid interest of Rs 25 lakh on its term loans, and received interest of Rs 6 lakh and dividend of Rs 4 lakh on its investments. Its accountant proposes to show all three items under operating activities, following the option available under IAS 7. What is the correct Ind AS 7 treatment?

Interest paid goes to financing activities, and interest and dividends received go to investing activities. Ind AS 7 does not give the IAS 7 option to classify these as operating items for non-financial entities.

  1. AInterest paid in financing activities; interest and dividend received in investing activitiesCorrect
  2. BAll three in operating activities, since the entity is not a financial entity
  3. CInterest paid in operating activities; interest and dividend received in investing activities
  4. DInterest paid and interest received in financing activities; dividend received in investing activities

Explanation

IAS 7 lets non-financial entities show interest paid and interest and dividends received as operating items. Ind AS 7 gives no such option and requires interest paid to be classified as financing and interest and dividends received as investing (refer paragraph 33). The operating-activity options reflect the IAS 7 choice and are wrong.

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