CFA Level I · CFA Level I Exam · Analyzing Statements of Cash Flows I
Under IFRS, which statement about the choice between the direct and indirect methods of presenting operating cash flows is most accurate?
Both methods give the same cash flow from operations. IFRS allows an entity to choose either presentation, and they differ only in how the total is shown, so the reported operating cash flow total is identical whichever method is used.
- ABoth methods give the same cash flow from operationsCorrect
- BOnly the indirect method is permitted for listed entities
- CThe direct method is required if the entity is profitable
Explanation
IFRS permits either method, and both produce the same total operating cash flow because they differ only in presentation. Listed status and profitability do not determine the method, so the other two statements are incorrect.
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