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

Kaveri Engineering Ltd is a non-financial entity. Under IAS 7 it could have shown interest paid as an operating cash flow. For its Ind AS financial statements, how must it classify interest paid and interest and dividends received?

Interest paid is classified as a financing activity, and interest and dividends received are classified as investing activities. Ind AS 7 does not offer a non-financial entity the IAS 7 option to show them as operating cash flows.

  1. AInterest paid as financing activity; interest and dividends received as investing activityCorrect
  2. BInterest paid as operating activity; interest and dividends received as investing activity
  3. CInterest paid as financing activity; interest and dividends received as operating activity
  4. DAll three items as operating activities, since the entity is not a financial entity

Explanation

For entities other than financial entities, IAS 7 gives an option to treat these as operating. Ind AS 7 gives no such option and requires interest paid to be financing and interest and dividends received to be investing (refer paragraph 33). Operating classification is therefore wrong.

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