Under U.S. GAAP, companies using the direct method of preparing a statement of cash flows must include a schedule reconciling net cash flow from operating activities with net income.

Question

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Under U.S. GAAP, companies that use the direct method for the statement of cash flows are required to provide a reconciliation of net income to net cash provided by operating activities, which effectively shows the indirect method as well. This requirement ensures that users of the financial statements have the information necessary to understand the differences between net income and net cash flows from operating activities.

Under US GAAP, Companies Using the Direct Method of Preparing a a Statement