Question

In a statement of cash flows using the indirect method, an increase in the available-for-sale debt securities account due to an increase in the debt's fair value should be reported as: Group of answer choices A deduction from net income in determining cash flows from operating activities. Not reported. An investing activity. An addition to net income in determining cash flows from operating activities.

Answer 1

Answer: Not reported.

Step-by-step explanation:

The Indirect method includes Net income in its calculation but this would not include any increase in Available-For-Sale (AFS) debt securities as these fall under other comprehensive income in the balance sheet.

Most importantly, the indirect method of calculating the cash the company has is for calculating just that, the cash. This means that an increase in the AFS security due to its fair value increasing will bring in no additional cash to the company so it is not reported in the cash flow statement.