Kế toán, kiểm toán - Chương 23: Statement of cash flows

PREVIEW OF CHAPTERIntermediate AccountingIFRS 2nd EditionKieso, Weygandt, and Warfield 23Identify sources of information for a statement of cash flows.Contrast the direct and indirect methods of calculating net cash flow from operating activities.Discuss special problems in preparing a statement of cash flows.Explain the use of a worksheet in preparing a statement of cash flows.After studying this chapter, you should be able to:Statement of Cash Flows23LEARNING OBJECTIVESDescribe the purpose of the statement of cash flows.Identify the major classifications of cash flows.Prepare a statement of cash flows.Differentiate between net income and net cash flow from operating activities.Determine net cash flows from investing and financing activities.Primary purpose: To provide information about a company’s cash receipts and cash payments during a period.Secondary objective:To provide cash-basis information about the company’s operating, investing, and financing activities.LO 1PREPARATION OF STATEMENT OF CASH FLOWSProvides information to help assess:Entity’s ability to generate future cash flows.Entity’s ability to pay dividends and meet obligations.Reasons for the difference between net income and net cash flow from operating activities.Cash and noncash investing and financing transactions during the period.LO 1Usefulness of the Statement of Cash FlowsPREPARATION OF STATEMENT OF CASH FLOWSIdentify sources of information for a statement of cash flows.Contrast the direct and indirect methods of calculating net cash flow from operating activities.Discuss special problems in preparing a statement of cash flows.Explain the use of a worksheet in preparing a statement of cash flows.After studying this chapter, you should be able to:Statement of Cash Flows23LEARNING OBJECTIVESDescribe the purpose of the statement of cash flows.Identify the major classifications of cash flows.Prepare a statement of cash flows.Differentiate between net income and net cash flow from operating activities.Determine net cash flows from investing and financing activities.Income Statement ItemsOperating ActivitiesChanges in Investments and Non-Current Asset ItemsChanges in Equity and Non-Current Liability ItemsLO 2Classification of Cash FlowsPREPARATION OF STATEMENTInvesting ActivitiesFinancing ActivitiesILLUSTRATION 23-1 Classification of Typical Cash Inflows and OutflowsLO 2Classification of Cash FlowsIncome Statement ItemsILLUSTRATION 23-1 Classification of Typical Cash Inflows and OutflowsLO 2Classification of Cash FlowsGenerally Investments and Non-Current Asset ItemsGenerally Equity and Non-Current Liability ItemsThe basis recommended by the IASB for the statement of cash flows is actually “cash and cash equivalents.” Cash equivalents are short-term, highly liquid investments that are both: Readily convertible to known amounts of cash, and So near their maturity that they present insignificant risk of changes value in (e.g., due to changes in interest rates).Generally, only investments with original maturities of three months or less qualify under this definition. LO 2Cash and Cash EquivalentsProduct Life CyclePresentation:Operating activities. Investing activities.Financing activities.Direct MethodIndirect MethodReport inflows and outflows from investing and financing activities separately.LO 2Format of the Statement of Cash FlowsFormat of the Statement of Cash FlowsILLUSTRATION 23-2LO 2Three Sources of Information:Comparative statements of financial position.Current income statement data.Selected transaction data.Three Major Steps: Step 1. Determine change in cash. Step 2. Determine net cash flow from operating activities. Step 3. Determine net cash flows from investing and financing activities.LO 2Steps in PreparationIdentify sources of information for a statement of cash flows.Contrast the direct and indirect methods of calculating net cash flow from operating activities.Discuss special problems in preparing a statement of cash flows.Explain the use of a worksheet in preparing a statement of cash flows.After studying this chapter, you should be able to:Statement of Cash Flows23LEARNING OBJECTIVESDescribe the purpose of the statement of cash flows.Identify the major classifications of cash flows.Prepare a statement of cash flows.Differentiate between net income and net cash flow from operating activities.Determine net cash flows from investing and financing activities.Illustration: Tax Consultants Inc. started on January 1, 2015, when it issued 60,000 shares of $1 par value common stock for $60,000 cash. The company rented its office space, furniture, and equipment, and performed tax consulting services throughout the first year. The comparative statements of financial position at the beginning and end of the year 2015 appear in Illustration 23-3. Illustration 23-4 shows the income statement and additional information for Tax Consultants.LO 3ILLUSTRATIONS— Tax Consultants Inc.ILLUSTRATION 23-3Comparative statements of financial position, Tax Consultants Inc., Year 1ILLUSTRATIONS— Tax Consultants Inc.LO 3ILLUSTRATIONS— Tax Consultants Inc.ILLUSTRATION 23-4Income Statement, Tax Consultants Inc., Year 1Additional Information: Examination of selected data indicates that a dividend of $14,000 was declared and paid during the year.LO 3Step 1: Determine the Change in CashLO 3ILLUSTRATIONS— Tax Consultants Inc.ILLUSTRATION 23-3Comparative statements of financial position, Tax Consultants Inc., Year 1Identify sources of information for a statement of cash flows.Contrast the direct and indirect methods of calculating net cash flow from operating activities.Discuss special problems in preparing a statement of cash flows.Explain the use of a worksheet in preparing a statement of cash flows.After studying this chapter, you should be able to:Statement of Cash Flows23LEARNING OBJECTIVESDescribe the purpose of the statement of cash flows.Identify the major classifications of cash flows.Prepare a statement of cash flows.Differentiate between net income and net cash flow from operating activities.Determine net cash flows from investing and financing activities.Company must determine revenues and expenses on a cash basis. Eliminate the effects of income statement transactions that do not result in an increase or decrease in cash.Convert net income to net cash flow from operating activities through either a direct method or an indirect method.Step 2: Determine the Net Cash Flow from Operating ActivitiesLO 4ILLUSTRATIONS— Tax Consultants Inc.ILLUSTRATION 23-5Net Income versus Net Cash Flow from Operating ActivitiesLO 4Step 2: Determine the Net Cash Flow from Operating ActivitiesILLUSTRATIONS— Tax Consultants Inc.Accounts Receivable1/1/15 Balance 0 Revenues 125,000Receipts from customers 89,00012/31/15 Balance 36,000Increase in Accounts Receivable—Indirect MethodILLUSTRATION 23-6LO 4Accounts receivable increased by $36,000 (from $0 to $36,000) during the year.When the Accounts Receivable balance increases, cash receipts are lower than revenue earned under the accrual basis. ILLUSTRATIONS— Tax Consultants Inc.Accounts Receivable1/1/15 Balance 0 Revenues 125,000Receipts from customers 89,00012/31/15 Balance 36,000Increase in Accounts Receivable—Indirect MethodILLUSTRATION 23-6LO 4The increase in accounts receivable is subtracted from net income to arrive at net cash provided by operating activities.ILLUSTRATION 23-7ILLUSTRATIONS— Tax Consultants Inc.Increase in Accounts Payable—Indirect MethodLO 4Accounts payable increased by $5,000 during the year.When accounts payable increase during the year, expenses on an accrual basis exceed those on a cash basis.ILLUSTRATION 23-7ILLUSTRATIONS— Tax Consultants Inc.Identify sources of information for a statement of cash flows.Contrast the direct and indirect methods of calculating net cash flow from operating activities.Discuss special problems in preparing a statement of cash flows.Explain the use of a worksheet in preparing a statement of cash flows.After studying this chapter, you should be able to:Statement of Cash Flows23LEARNING OBJECTIVESDescribe the purpose of the statement of cash flows.Identify the major classifications of cash flows.Prepare a statement of cash flows.Differentiate between net income and net cash flow from operating activities.Determine net cash flows from investing and financing activities.ILLUSTRATION 23-3ILLUSTRATION 23-8Step 3: Determine Net Cash Flows from Investing and Financing ActivitiesTAX CONSULTANTS INC.Statement Of Cash FlowsFor The Year Ended December 31, 2015Increase (Decrease) In CashILLUSTRATION 23-3ILLUSTRATION 23-8Step 3: Determine Net Cash Flows from Investing and Financing ActivitiesTAX CONSULTANTS INC.Statement Of Cash FlowsFor The Year Ended December 31, 2015Increase (Decrease) In CashILLUSTRATION 23-3ILLUSTRATION 23-8Step 3: Determine Net Cash Flows from Investing and Financing ActivitiesTAX CONSULTANTS INC.Statement Of Cash FlowsFor The Year Ended December 31, 2015Increase (Decrease) In CashILLUSTRATION 23-3ILLUSTRATION 23-8Step 3: Determine Net Cash Flows from Investing and Financing ActivitiesTAX CONSULTANTS INC.Statement Of Cash FlowsFor The Year Ended December 31, 2015Increase (Decrease) In CashStatement of Cash Flows—2015ILLUSTRATION 23-8Illustration—2016LO 5ILLUSTRATION 23-9Comparative Statementsof Financial Position, TaxConsultants Inc., Year 2Illustration—2016LO 5ILLUSTRATION 23-10Income Statement, TaxConsultants Inc., Year 2Step 1: Determine the Change in CashLO 5ILLUSTRATION 23-9Step 2: Determine Net Cash Flow from Operating Activities—Indirect MethodLO 5ILLUSTRATION 23-9Accounts receivable decreased during the period because cash receipts (cash-basis revenues) are higher than revenues reported on an accrual basis.Step 2: Determine Net Cash Flow from Operating Activities—Indirect MethodLO 5To convert net income to net cash flow from operating activities, the decrease of $10,000 in accounts receivable must be added to net income.ILLUSTRATION 23-11Computation of Net Cash Flow fromOperating Activities, Year 2—Indirect MethodStep 2: Determine Net Cash Flow from Operating Activities—Indirect MethodLO 5ILLUSTRATION 23-9When prepaid expenses (assets) increase during a period, expenses on an accrual-basis income statement are lower than they are on a cash-basis income statement.Step 2: Determine Net Cash Flow from Operating Activities—Indirect MethodLO 5To convert net income to net cash flow from operating activities, the increase of $6,000 must be deduct from net income.ILLUSTRATION 23-11Computation of Net Cash Flow fromOperating Activities, Year 2—Indirect MethodStep 2: Determine Net Cash Flow from Operating Activities—Indirect MethodLO 5ILLUSTRATION 23-9When accounts payable increase, the company incurred a greater amount of expense than the amount of cash it disbursed.Step 2: Determine Net Cash Flow from Operating Activities—Indirect MethodLO 5Tax Consultants must add the 2016 increase of $35,000 in accounts payable to net income, to convert to net cash flow from operating activities.ILLUSTRATION 23-11Computation of Net Cash Flow fromOperating Activities, Year 2—Indirect MethodStep 2: Determine Net Cash Flow from Operating Activities—Indirect MethodLO 5ILLUSTRATION 23-9Depreciation expense of $21,000 (also represented by the increase in accumulated depreciation) is a non-cash charge.ILLUSTRATION 23-10Step 2: Determine Net Cash Flow from Operating Activities—Indirect MethodLO 5Tax Consultants adds depreciation expense back to net income, to arrive at net cash flow from operating activities.ILLUSTRATION 23-11Computation of Net Cash Flow fromOperating Activities, Year 2—Indirect MethodStep 3: Determine Net Cash Flow from Investing and Financing ActivitiesLO 5ILLUSTRATION 23-9The company purchased land of $70,000 during the period.LO 5The purchase of land for cash is an investing activity, reported as a use of cash.ILLUSTRATION 23-12Statement of Cash Flows, Tax Consultants Inc., Year 2Step 3: Determine Net Cash Flow from Investing and Financing ActivitiesStep 3: Determine Net Cash Flow from Investing and Financing ActivitiesLO 5ILLUSTRATION 23-9Tax Consultants acquired an office building using $200,000 cash.LO 5The purchase of a building for cash is an investing activity, reported as a use of cash.ILLUSTRATION 23-12Statement of Cash Flows, Tax Consultants Inc., Year 2Step 3: Determine Net Cash Flow from Investing and Financing ActivitiesStep 3: Determine Net Cash Flow from Investing and Financing ActivitiesLO 5ILLUSTRATION 23-9Tax Consultants acquired equipment using $68,000 cash.LO 5The purchase of equipment for cash is an investing activity, reported as a use of cash.ILLUSTRATION 23-12Statement of Cash Flows, Tax Consultants Inc., Year 2Step 3: Determine Net Cash Flow from Investing and Financing ActivitiesStep 3: Determine Net Cash Flow from Investing and Financing ActivitiesLO 5ILLUSTRATION 23-9Tax Consultants acquired received $150,000 from the issuance of bonds.LO 5The cash received from the issuance of these bonds represents an inflow of cash from a financing activity.ILLUSTRATION 23-12Statement of Cash Flows, Tax Consultants Inc., Year 2Step 3: Determine Net Cash Flow from Investing and Financing ActivitiesStep 3: Determine Net Cash Flow from Investing and Financing ActivitiesLO 5ILLUSTRATION 23-9Two factors explain the increase in retained earnings: (1) net income of $134,000 increased retained earnings, and (2) dividends of $18,000 decreased retained earnings.LO 5Payment of the dividends is a financing activity that involves a cash outflow.ILLUSTRATION 23-12Statement of Cash Flows, Tax Consultants Inc., Year 2Step 3: Determine Net Cash Flow from Investing and Financing ActivitiesILLUSTRATION 23-12LO 5Identify sources of information for a statement of cash flows.Contrast the direct and indirect methods of calculating net cash flow from operating activities.Discuss special problems in preparing a statement of cash flows.Explain the use of a worksheet in preparing a statement of cash flows.After studying this chapter, you should be able to:Statement of Cash Flows23LEARNING OBJECTIVESDescribe the purpose of the statement of cash flows.Identify the major classifications of cash flows.Prepare a statement of cash flows.Differentiate between net income and net cash flow from operating activities.Determine net cash flows from investing and financing activities.Sources of Information for the Statement of Cash FlowsComparative statements of financial position.An analysis of the Retained Earnings account.Write-downs, amortization charges, and similar “book” entries, such as depreciation, because they have no effect on cash.LO 6LO 6Indirect Method—Additional AdjustmentsILLUSTRATION 23-17Adjustments Needed to Determine Net CashFlow from Operating Activities—Indirect MethodIdentify sources of information for a statement of cash flows.Contrast the direct and indirect methods of calculating net cash flow from operating activities.Discuss special problems in preparing a statement of cash flows.Explain the use of a worksheet in preparing a statement of cash flows.After studying this chapter, you should be able to:Statement of Cash Flows23LEARNING OBJECTIVESDescribe the purpose of the statement of cash flows.Identify the major classifications of cash flows.Prepare a statement of cash flows.Differentiate between net income and net cash flow from operating activities.Determine net cash flows from investing and financing activities.Net Cash Flow from Operating Activities—Direct MethodILLUSTRATION 23-21Major Classes of Cash Receipts and PaymentsLO 7Drogba Company, which began business on January 1, 2015, has the following selected statement of financial position information.Direct Method ExampleILLUSTRATION 23-19Statement of Financial Position Accounts, Drogba Co.LO 7LO 7Drogba’s December 31, 2015, income statement and additional information are as follows.Direct Method ExampleILLUSTRATION 23-20Income Statement, Drogba Co.Additional Information(a) Dividends of €70,000 were declared and paid in cash.(b) The accounts payable increase resulted from the purchase of merchandise.(c) Prepaid expenses and accrued expenses payable relate to operating expenses.Accounts receivable increased €15,000. Thus, cash receipts from customers are computed as follows.Illustration 23-22Accounts Receivable1/1/15 Balance 59,000 Sales revenue 780,000Receipts from customers 765,00012/31/15 Balance 15,000Operating Activities — Direct MethodLO 7Drogba Company reported cost of goods sold on its income statement of €450,000. In 2015, Drogba Company’s inventory increased €160,000. The company computes purchases as follows.Accounts Payable1/1/15 Balance 0Purchases 610,00012/31/15 Balance 60,000Operating Activities — Direct MethodCost of goods sold €450,000Add: Increase in inventory 160,000Purchases €610,000LO 7Drogba determines cash payments to suppliers by adjusting purchases for the change in accounts payable.Accounts Payable1/1/15 Balance 0Purchases 610,00012/31/15 Balance 60,000Operating Activities — Direct MethodPayments to suppliers 550,000ILLUSTRATION 23-23Formula to Compute Cash Payments to SuppliersLO 7Drogba reported operating expenses of €160,000 on its income statement. To determine the cash paid for operating expenses, it must adjust this amount for any changes in prepaid expenses and accrued expenses payable.Operating Activities — Direct MethodILLUSTRATION 23-24Formula to Compute Cash Payments for Operating ExpensesLO 7Accrued Expenses Payable1/1/15 Balance 012/31/15 Balance 20,000Operating Activities — Direct MethodPrepaid Expenses1/1/15 Balance 012/31/15 Balance 8,000Operating expenses €160,000Add: Increase in prepaid expenses 8,000Deduct: Increase in accrued expenses payable 20,000Cash payments for operating expenses €148,000LO 7Income Tax Payable1/1/15 Balance 0Income tax expense 48,00012/31/15 Balance 0Payments for income tax 48,000Operating Activities — Direct MethodThe income statement for Drogba shows income tax expense of €48,000. Cash paid for income taxes is computed by taking the expense and adjusting by the change in the payable.LO 7Operating Activities — Direct MethodPresentation of the direct method for reporting net cash flow from operating activities.ILLUSTRATION 23-26Operating Activities Section—Direct Method, 2016LO 7Operating Activities — Direct MethodWhen companies use the direct method they are required to provide in a separate schedule the reconciliation of net income to net cash provided by operating activities.ILLUSTRATION 23-26Operating Activities Section—Direct Method, 2016LO 7Operating Activities — Direct MethodA separate schedule reconciling net income to net cash provided by operating activities is required when using the direct method.ILLUSTRATION 23-27Reconciliation of Net Income to Net CashProvided by Operating Activities, 2016LO 7Identify sources of information for a statement of cash flows.Contrast the direct and indirect methods of calculating net cash flow from operating activities.Discuss special problems in preparing a statement of cash flows.Explain the use of a worksheet in preparing a statement of cash flows.After studying this chapter, you should be able to:Statement of Cash Flows23LEARNING OBJECTIVESDescribe the purpose of the statement of cash flows.Identify the major classifications of cash flows.Prepare a statement of cash flows.Differentiate between net income and net cash flow from operating activities.Determine net cash flows from investing and financing activities.SPECIAL PROBLEMS IN STATEMENT PREPARATIONAmortization of limited-life intangible assets.Amortization of bond discount or premium.Depreciation and AmortizationPostretirement Benefit CostsCompany must adjust net income by the difference between cash paid and the expense reported.LO 8Adjustments to Net IncomeAdjustments to Net IncomeAffect net income but have no effect on cash.Changes in Deferred Income TaxesEquity Method of AccountingNet increase in the investment account does not affect cash flows. Company must deduct the net increase from net income to arrive at net cash flow from operating activities.LO 8A loss is added to net income to compute net cash flow from operating activities because the loss is a noncash charge in the income statement.Company reports a gain in the statement of cash flows as part of the cash proceeds from the sale of equipment under investing activities, thus it deducts the gain from net income to avoid double-counting—once as part of net income and again as part of the cash proceeds from the sale.Loss and GainsLO 8Adjustments to Net IncomeCash is not affected by recording the expense. The company must increase net income by the amount of compensation expense from share options in computing net cash flow from operating activities.Share-Based CompensationLO 8Adjustments to Net IncomeBecause an increase in Allowance for Doubtful Accounts results from a charge to bad debt expense, a company should add back an increase in Allowance for Doubtful Accounts to net income to arrive at net cash flow from operating activities.Indirect MethodILLUSTRATION 23-28Accounts Receivable Balances, Redmark Co.LO 8SPECIAL PROBLEMSAccounts Receivable (Net)Accounts Receivable (Net)One method of presenting this information in the statement of cash flows:Indirect MethodLO 8REDMARK CO.Statement of Cash Flows (Partial)For The Year 2014ILLUSTRATION 23-29Presentation of Allowance for Doubtful Accounts—Indirect MethodAccounts Receivable (Net)Alternate method (net approach) of presenting this information in the statement of cash flows:LO 8REDMARK CO.Statement of Cash Flows (Partial)For The Year 2014Indirect MethodILLUSTRATION 23-30Net Approach toAllowance for DoubtfulAccounts—IndirectMethodAccounts Receivable (Net)Company should not net Allowance for Doubtful Accounts against Accounts Receivable.Direct MethodLO 8ILLUSTRATION 23-31Income Statement,Redmark Co.Accounts Receivable (Net)ILLUSTRATION 23-31Cash sales should be reported at €85,000 (€100,000 - 9,000 - 6,000).Increase in Accounts ReceivableILLUSTRATION 23-32Bad Debts—DirectMethodLO 8Direct MethodREDMARK CO.Income Statement For The Year 2014Company should not net Allowance for Doubtful Accounts against Accounts Receivable.Some changes in working capital, although they affect cash, do not affect net income.Purchase of short-term non-trading equity securities.Issuance of a short-term non-trade note payable for cash.Cash dividend payable.LO 8SPECIAL PROBLEMSOther Working Capital ChangesIllustration: If the net loss is £50,000 and the total amount of charges to add back is £60,000, then net cash provided by operating activities is £10,000.ILLUSTRATION 23-33Computation of Net Cash Flow from Operating Activities—Cash InflowLO 8Net LossesSPECIAL PROBLEMSCommon noncash transactions that a company should report or disclose:Acquisition of assets by assuming liabilities (including finance lease obligations) or by issuing equity securities.Exchanges of non-monetary assets.Refinancing of long-term debt.Conversion of debt or preference shares to ordinary shares.Issuance of equity securities to retire debt.LO 8Significant Non-Cash TransactionsDisclosuresIdentify sources of information for a statement of cash flows.Contrast the direct and indirect methods of calculating net cash flow from operating activities.Discuss special problems in preparing a statement of cash flows.Explain the use of a worksheet in preparing a statement of cash flows.After studying this chapter, you should be able to:Statement of Cash Flows23LEARNING OBJECTIVESDescribe the purpose of the statement of cash flows.Identify the major classifications of cash flows.Prepare a statement of cash flows.Differentiate between net income and net cash flow from operating activities.Determine net cash flows from investing and financing activities.USE OF A WORKSHEETA worksheet involves the following steps.Step 1. Enter the statement of financial position accounts and their beginning and ending balances in the statement of financial position accounts section.Step 2. Enter the data that explain the changes in the statement of financial position accounts and their effects on the statement of cash flows in the reconciling columns of the worksheet.Step 3. Enter the increase or decrease in cash on the cash line and at the bottom of the worksheet. This entry should enable the totals of the reconciling columns to be in agreement.LO 9STATEMENT OF CASH FLOWSAs in IFRS, the statement of cash flows is a required statement for U.S. GAAP. In addition, the content and presentation of a U.S. GAAP statement of cash flows is similar to one used for IFRS. However, the disclosure requirements related to the statement of cash flows are more extensive under U.S. GAAP.GLOBAL ACCOUNTING INSIGHTSRelevant FactsFollowing are the key similarities and differences between U.S. GAAP and IFRS related to the statement of cash flows.SimilaritiesBoth U.S. GAAP and IFRS require that companies prepare a statement of cash flows.Both U.S. GAAP and IFRS require that the statement of cash flows should have three major sections—operating, investing, and financing—along with changes in cash and cash equivalents.Similar to U.S. GAAP, the cash flow statement can be prepared using either the indirect or direct method under IFRS. For both U.S. GAAP and IFRS, most companies use the indirect method for reporting net cash flow from operating activities. GLOBAL ACCOUNTING INSIGHTSRelevant FactsSimilaritiesThe definition of cash equivalents used in U.S. GAAP is similar to that used in IFRS.DifferencesUnder U.S. GAAP, bank overdrafts are classified as financing activities. A major difference in the definition of cash and cash equivalents is that in certain situations, bank overdrafts are considered part of cash and cash equivalents under IFRS. GLOBAL ACCOUNTING INSIGHTSRelevant FactsDifferencesUnder U.S. GAAP, companies may present non-cash investing and financing activities in the cash flow statement. IFRS requires that non-cash investing and financing activities be excluded from the statement of cash flows. As indicated in the chapter, these non-cash activities should be reported elsewhere. This requirement is interpreted to mean that non-cash investing and financing activities should be disclosed in the notes to the financial statements instead of in the financial statements.One area where there can be substantive differences between U.S. GAAP and IFRS relates to the classification of interest, dividends, and taxes. U.S. GAAP requires that except for dividends paid (which are classified as a financing activity), these items are all reported as operating activities. IFRS provides more alternatives for disclosing these items.GLOBAL ACCOUNTING INSIGHTSOn the HorizonPresently, the IASB and the FASB are involved in a joint project on the presentation and organization of information in the financial statements. With respect to the cash flow statement specifically, the notion of cash equivalents will probably not be retained. The definition of cash in the existing literature would be retained, and the statement of cash flows would present information on changes in cash only. In addition, the IASB and FASB favor presentation of operating cash flows using the direct method only.GLOBAL ACCOUNTING INSIGHTSCopyright © 2015 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.COPYRIGHT