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 is an unrealized gain and thus should not be reported as a cash flow. It increases other comprehensive income instead of net income. Option D correctly states that it should not be reported in the statement of cash flows.

In a Statement of Cash Flows Using the Indirect Method