What method does IAS 7 encourage for the reporting of cash flows from operating activities and what does it mean for the presentation of this category in the statement of cash flows?
A)The derivative method is required.This means that the amounts are presented as increases or decreases in balance sheet working capital accounts.
B)The indirect method is required.This means that the cash flows are presented as accrual amounts from the operating section of the statement of comprehensive income adjusted for non-cash effects.
C)The direct method is required.This means that the gross cash flows from operating items are presented.
D)Either the derivative or the direct method is required.For the derivative method this means that the amounts are presented as increases or decreases in the statement of financial position or for the direct method, this means that the gross cash flows from operating items presented is permitted

Question

Quizplus · Accepted Answer

IAS 7 requires the direct method for presenting cash flows from operating activities. This means that the gross cash inflows and outflows from operating items are presented, providing more detailed information about the cash flows generated from the company's operations. However, if the direct method is too impractical or costly, the indirect method may be used with reconciliation of net profit or loss to cash flows from operating activities. The derivative method is not required by IAS 7 for the reporting of cash flows.

What Method Does IAS 7 Encourage for the Reporting of Cash