Which of the following statements about classification choices is correct?
A)GAAP classifies cash dividends paid as a financing activity,but IFRS allows them to be classified as either an operating or financing activity.
B)GAAP allows interest paid to be classified as either an operating or financing activity,but IFRS requires that it be classified as a financing activity.
C)GAAP classifies cash dividends received as an investing activity,but IFRS allows them to be classified as either an operating or investing activity.
D)GAAP classifies interest received as either an operating or investing activity,but IFRS requires it to be classified as an investing activity.

Question

Quizplus · Accepted Answer

GAAP classifies cash dividends paid as financing activities because they are transactions with stockholders.IFRS allows cash dividends paid to also be classified as operating activities to assist users in determining the company's ability to pay dividends out of operating cash flows.GAAP requires cash payments of interest and the cash receipts of dividends and interest to be classified as operating activities because all three enter into the determination of net income.IFRS allows interest paid to also be classified as a financing activity because it is a cost of obtaining financial resources.IFRS also allows interest and dividends received to be classified as investing activities because they are returns on investments.

Which of the Following Statements About Classification Choices Is Correct