Skip to content

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

Sarvodaya Textiles Ltd, a manufacturing company (not a financial entity), prepares its statement of cash flows under Ind AS 7. During the year it paid Rs 12 lakh as interest on term loans, received Rs 3 lakh as interest on fixed deposits and Rs 2 lakh as dividend from equity investments, and paid Rs 8 lakh as dividend to its shareholders. As per the comparison with IAS 7 in the Ind AS 7 appendix, how should these items be classified?

Under Ind AS 7, a non-financial entity shows interest paid as a financing activity, interest and dividends received as investing activities, and dividends paid as a financing activity. Unlike IAS 7, Ind AS 7 offers no option to classify these items as operating cash flows.

  1. AInterest paid as financing, interest and dividends received as investing, dividend paid as financingCorrect
  2. BInterest paid as operating, interest and dividends received as operating, dividend paid as operating
  3. CInterest paid as financing, interest and dividends received as operating, dividend paid as operating
  4. DInterest paid as operating, interest and dividends received as investing, dividend paid as financing

Explanation

Ind AS 7 gives no option to classify interest paid as operating or interest and dividends received as operating for non-financial entities. Interest paid goes to financing, interest and dividends received go to investing, and dividend paid goes to financing only. The IAS 7 option to show dividend paid as operating is not available in Ind AS 7.

Did you get it right without looking?

One question tells you little. A timed set on Ind AS 7 Statement of Cash Flows shows your real accuracy, how long you take and where you lose marks.

Practise Ind AS 7 Statement of Cash FlowsFree diagnostic mock

More Ind AS 7 Statement of Cash Flows questions