In a statement of cash flows using the indirect method, an increase in available-for-sale securities due to an increase in their fair value should be reported as:
A)A deduction from net income in determining cash flows from operating activities.
B)An addition to net income in determining cash flows from operating activities.
C)An investing activity.
D)Not reported.The unrealized gain increased other comprehensive income, not net income, and is not a cash flow.

Question

Quizplus · Accepted Answer

The increase in available-for-sale securities due to an increase in their fair value should not be reported as a cash flow since it is an unrealized gain that increases other comprehensive income, not net income. Therefore, the correct choice is D, which indicates that it should not be reported.

In a Statement of Cash Flows Using the Indirect Method