CFA Level I · CFA Level I Exam · Analyzing Statements of Cash Flows I
Under IFRS, a company purchases a building by issuing 5,000,000 of its own shares to the seller, with no cash changing hands. This transaction is most likely:
The share-for-building exchange involves no cash, so it is left out of the cash flow statement and disclosed separately, such as in the notes. Non-cash investing and financing transactions are disclosed rather than grossed up as inflows and outflows.
- Areported as a 5,000,000 investing outflow and financing inflow
- Bexcluded from the cash flow statement and disclosed elsewhere in the financial statementsCorrect
- Creported as a 5,000,000 operating outflow only
Explanation
Non-cash investing and financing transactions are excluded from the statement of cash flows and disclosed separately, for example in the notes. No cash is received or paid, so showing gross inflows and outflows would be incorrect.
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