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CMA Intermediate · Corporate Accounting and Auditing · Cash Flow Statement

Which statement best reflects what Ind AS 7 says about the use of historical cash flow information?

Ind AS 7 says historical cash flow information is often used as an indicator of the amount, timing and certainty of future cash flows. It also helps check past assessments of future flows and examine the link between profitability and net cash flow.

  1. AIt is useful only for computing current tax liability
  2. BIt replaces the need for a Balance Sheet and Statement of Profit and Loss
  3. CIt is often used as an indicator of the amount, timing and certainty of future cash flowsCorrect
  4. DIt is useful only for assessing past profitability, not future flows

Explanation

Paragraph 5 of Ind AS 7 states historical cash flow information is often used as an indicator of the amount, timing and certainty of future cash flows, and helps check past assessments and examine the relationship between profitability and net cash flow. The other options narrow or distort this.

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