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1、StatementofCashFlows:whatarethedifferencesbetweenIFRSandUSGAAP?•Indirect Method Statement of Cash Flows Terminology and Presentation •Direct Method Statement of Cash Flows Terminology and Presentation Indirect Method Statement of Cash Flows Terminology and
2、PresentationHowareIFRSandUSGAAPdifferent?When preparing an IFRS income statement, net income is called netprofit. Interest expense and preferred share dividend payments are referred to as financecosts, while interest and dividend revenue is referred to as f
3、inancerevenue. These terms are carried over to the statement of cash flows. Under US GAAP, interest expense, interest revenue, and dividend revenue are part of net income, and are therefore included as part of operating activities. On an IFRS indirect metho
4、d statement of cash flows, these items are often removed from net income under operating activities, similar to the removal of depreciation expense. Under US GAAP, dividend payments on preferred stock are treated in the same manner as dividend payments on c
5、ommon stock: both are included as part of financing activities. Under IFRS, dividend payments on preferred shares are part of finance revenue, and are therefore listed under investing activities, while dividend payments on common shares remain part of finan
6、cing activities. IFRS allow finance revenues to be reported under investing activities, and finance costs to be reported under financing activities. Howwoulditchangethefinancialstatements?On an indirect method statement of cash flows, finance costs and reve
7、nues may be clearly removed from net income under operating activities, and placed under new activity categories. The amounts of operating, investing, and financing activities would change, but the total cash flows will remain the same. Whatcoulditmeanforbu
8、sinesses?Cash from investing activities may increase, and cash from financing activities may decrease. These changes would be balanced out by cash from operating activities. Financial statement readers
