Both U.S.GAAP and IFRS permit considerable flexibility with respect to the display of information in the statement of cash flows.If the firm uses the direct method of reporting cash flows from _____ activities rather than the indirect method, it must also provide a separate reconciliation of net income to cash flows from _____
A)operating; operating
B)financing; financing
C)investing; investing
D)operating, investing; and financing; operating, investing; and financing;
E)none of the above

Question

Quizplus · Accepted Answer

If the firm uses the direct method of reporting cash flows, it must provide a separate reconciliation of net income to cash flows from operating activities. This is because the direct method reports actual cash inflows and outflows from operating activities, while net income is calculated using accrual accounting. The direct method does not require separate reconciliations for financing and investing activities.

Both USGAAP and IFRS Permit Considerable Flexibility with Respect to the the Display