How preparing statement of cash flows is different under IFRSs and GAAPs?
One of the key benefits of statement of cash flows or cash flow statement is its comparability. This is due to the fact that although we have difference accounting frameworks in the world even then cash flow statements are produced on almost the same basis. Definitely, there will be some differences if look deeper but […]
How a liability paid in kind or by issuing shares is disclosed in statement of cash flows?
Most of the time entities pay out their liabilities, whether short term or long term, in cash. And by cash it means either in hard cash or by issuing cheque or using cash equivalents. Sometime company does not have a ready cash in which case it will sell an asset, get the cash and pay […]
Which method is preferable to prepare Statement of Cash Flows?
International Accounting Standard (IAS) 7 Statement of Cash Flows give entity the choice to choose freely in selecting the method to prepare statement of cash flows. Moreover, IAS 7 does not bound entities or types of entities to follow a particular method for reporting cash flows during the period nor it mentions any set of […]
What transactions are adjusted in profit or loss to prepare statement of cash flows under indirect method?
Statement of Cash Flows or Cash Flow Statement can be prepared using two methods; direct method or indirect method. As under indirect method, income statement or statement of comprehensive income is used to determine cash flows from operating activities therefore, profit or loss figure requires some adjustments. These adjustments are made because entity is required […]
How a loan repayment is disclosed in statement of cash flows?
First things first, a loan can be repaid in number of ways for example in cash, by handing over certain asset or converting debt to shares etc. But if the repayment does not involve cash outflow then such transaction will not be disclosed in the statement of cash flows. A loan installment mostly has two […]
How interest and dividends are disclosed in statement of cash flows?
This often confuse students who are studying Statement of Cash Flows that what is the correct way of disclosing or presenting interest paid or received and dividends paid or received during the period. Many students even after learning how to prepare a cash flow statement remain unclear that under what activity should we show interest […]
When training costs can be capitalized?
It is correct that International Accounting Standards and especially IAS 16 Property, Plant and Equipment has specifically ruled out the capitalization of any expenditure incurred on training costs. You can read in more detail that why training costs are not allowed for capitalization as an asset or as part of the cost of other asset […]
What is meant by Depreciation?
Depreciation simply means a steady decrease in the value of asset. Often it is studied in relation to the time period over which such decrease in the value has occurred. Therefore, often it is also defined as the value lost by the asset over its useful life i.e. the time period for which it was subjected […]
What is complex asset or separate component asset?
An asset that consistes of different components and each component is significant in relation to the cost of the asset then such assets are called complex assets or separate components asset. This becomes an important point of discussion when each component is needed to be depreciated separately because: each component is of significant value in […]
What is NIFO inventory valuation method?
NIFO - Next in, First out is an inventory valuation technique in which issues to the production hall are valued at the current market price i.e. current cost or replacement cost instead of the cost at which material was bought i.e. historical cost. This valuation method attempts to keep the production cost accurate according to […]
