Question

Cash flows from operating activities

A. Must be presented using the direct method of disclosure.

B. Must be presented using the indirect method of disclosure.

C. Should be presented using the direct method, but use of the indirect method of disclosure is allowed.

D. Can be presented in any logical format if cash flow per share of common stock is clearly disclosed.

Answer 1

The correct answer is letter "C": Should be presented using the direct method, but use of the indirect method of disclosure is allowed.

Step-by-step explanation:

Cash flow from operating activities is a portion of the Statement of Cash Flows that are included after the Balance Sheet and Income Statements in a company's Financial Statements. Cash flow from operating activities shows up in the first portion of the cash flow statement. The cash flow from financial activities demonstrated using the indirect or direct method.

Answer 2

Answer: The correct answer is "C. Should be presented using the direct method, but use of the indirect method of disclosure is allowed.".

Explanation: Cash flows from operating activities should be presented using the direct method, but use of the indirect method of disclosure is allowed.

According to IAS 7, the cash flow statement can be presented by both methods, in which operation, investment and financing activities must be taken into account and differentiated.