Skip to content
Sign inRegister

Ask the Tutor ACCA FA

Classification of Interest and Dividends in the Statement of Cash Flows

SSheharyar5d ago

Question:

If the question is silent (i.e. does not specify an accounting policy), how should we classify the following four items in the Statement of Cash Flows?

  1. Interest paid

  2. Dividend paid

  3. Interest received

  4. Dividend received

Should we assume all four are included in operating activities, or should we classify the payments as financing activities (interest paid because it relates to borrowing and dividend paid because it relates to equity financing), while the receipts are classified as investing activities?

What is the correct approach for all 4 when the question is silent?

John MoffatJohn MoffatTutor4d ago#1

Dividends paid and interest paid should be shown as deductions from the cash generated from operations in arriving at the net cash from operating activities.

Interest received and dividends received should be shown as cash flows from investing activities.

Do watch my free lectures on the Statement of Cash Flows where this is all explained.

SSheharyar4d ago#2

Thanks John,

Yes, I did watch them. The confusion arose as IAS-7 does allow to deduct dividend from financing activities if entity has decided that as per their policy. So I wanted to confirm the same for all of these if the question is silent.

Thank you again!

John MoffatJohn MoffatTutor4d ago#3

You are welcome :-)

Topic lockedNew replies are closed.