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As per IAS 7, interest received and paid can be classified as either operating, financing and investing activities. Will this not prevent inter firm comparison if a company present interest paid and received under operating activities and another firm in the same industry present interest paid and received under financing activities as most cash flow analysis is done with the ‘cash flow from operating activities’ section. If so, what should we do to allow for inter firm comparison?
The classification will depend on what the interest is received for and the different companies will classify it in the same place if they are receiving the interest for the same reason.
If interest received is from investments that they have made then it will be in investing activities for both businesses, which therefore allows like-for-like comparison.
Thank you Sir, your answer has clarified me about this topic.
Glad it has helped!