Final answer:
Dividends paid to noncontrolling shareholders appear in the financing activities section on the consolidated statement of cash flows, as they represent a cash outflow related to the financing of the entity.
Step-by-step explanation:
On the consolidated statement of cash flows, dividends paid to noncontrolling shareholders typically appear in the financing activities section.
This is because such dividends are considered a form of financing cash outflow. Noncontrolling interest represents the share of equity in a subsidiary not owned by the parent company, and the distribution of dividends to noncontrolling shareholders is a cash payment that affects the equity of the consolidated entity.
Although dividends received from stock investments are reported in the current account as an import to income, the actual payment of dividends to noncontrolling shareholders reflects a use of cash. Therefore, when preparing a consolidated statement of cash flows, dividends paid out to these shareholders must be shown as a reduction in cash within the financing activities section.
Dividends paid to noncontrolling shareholders should appear in the financing activities section of the consolidated statement of cash flows.
The financing activities section reports the cash flows related to the company's financing activities, including the issuance and repurchase of stock, payment of dividends, and borrowing or repayment of debt.
Dividends paid to noncontrolling shareholders are considered a distribution of profits and are therefore categorized as cash outflows in the financing activities section.