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

Kaveri Engineering Ltd (not a financial entity) prepares its cash flow statement under Ind AS 7. During the year it paid interest of ₹12 lakh on its term loan and received interest of ₹3 lakh on fixed deposits. Which classification is required?

Interest paid is classified under financing activities and interest received under investing activities. Ind AS 7 does not give non-financial entities the IAS 7 option to treat these items as operating cash flows, so Kaveri Engineering must follow this classification.

  1. AInterest paid in financing activities; interest received in investing activitiesCorrect
  2. BBoth interest paid and interest received in operating activities
  3. CInterest paid in operating activities; interest received in investing activities
  4. DInterest paid in financing activities; interest received in operating activities

Explanation

IAS 7 lets non-financial entities treat interest paid and interest and dividends received as operating items. Ind AS 7 gives no such option: interest paid goes to financing activity and interest and dividends received go to investing activity. The operating-based options therefore fail.

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