The FASB requires a reconciliation of net income to net cash provided or used by operating activities when the direct method is used.

Question

Quizplus · Accepted Answer

This statement is true. According to FASB rules, when a company uses the direct method to report its cash flows from operating activities, it must provide a reconciliation of net income to net cash provided or used by operating activities. This is done to show how non-cash items, such as depreciation and changes in working capital, affect the company's cash position.

The FASB Requires a Reconciliation of Net Income to Net