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

Sundaram Textiles Ltd, a manufacturing company (not a financial entity), prepares its cash flow statement under Ind AS 7. During the year it paid a dividend of Rs 12 lakh to its equity shareholders and the finance team wants to present it within operating activities, as IAS 7 permits. How should the dividend paid be classified under Ind AS 7?

Dividend paid must be shown under financing activities only. Ind AS 7 removes the IAS 7 option to present it as an operating item, so a non-financial company like Sundaram Textiles cannot choose operating classification for its dividend payment.

  1. AOperating activities, because the company is not a financial entity
  2. BFinancing activities only, as Ind AS 7 gives no option to classify it elsewhereCorrect
  3. CInvesting activities, because it is a return on investment
  4. DEither operating or financing activities, at the company's choice

Explanation

The comparison with IAS 7 notes that IAS 7 allows dividend paid to be shown as operating, but Ind AS 7 requires it to be classified as part of financing activity only (refer paragraph 34). The option of choosing operating or financing is therefore not available under Ind AS 7.

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