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Hi mike
Quick question the finance cost of 6 is added back in the operating activities section. Since this is the accrual of interest it is a non cash item and added back. Why then are we subtracting the same amount for interest paid. I know this is actual cash that was paid out but why is this the same amount as the accrual. Should we not be comparing the movement in long term borrowings and taking into account the accrual to get the actual interest paid?
Thanks
i remember my teacher explained this in f7. i can’t remember what she said but she said those finance cost is added in operating activities and deducted in the other section. i think thats all you need to know and not worry about the deets. not at this time anyway.
Hi Anisa
Whatever Aimanal has remembered from his tutor, it doesn’t seem to be relevant to your question.
If there is no current liability for accrued interest brought forward, nor carried forward, then the amount of the add-back will of course be the same as the amount actually paid.
Differences arise when there is accrued interest either brought forward or carried forward (or both)
Then comes the mantra “brought forward, income statement, carried forward, cash”
OK?
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