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Why we add interest payable expense while calculating Net cash from operating activities ? It’s a not a non-cash, so why we add?
Because the interest paid has to be shown as a separate item on the statement, as I explain in my free lectures on this.
Hello,
What about interest received?
Is this classified as ‘investment income’?
And if so, why does the ACCA website say that you list dividends received under investing activities and ‘Investment Income’ under operating activities?
Many thanks,
JackIf you are referring to the Paper FA technical article on Cash Flow Statements, it makes no mention of dividends received 🙂
IAS7 allows some flexibility in presentation. Interest received and dividends received are generally shown as part of cash flows from operating activities (because they are included in the calculation of profit in the SOPL). However IAS7 does allow them to be shown under investing activities (provided they are treated the same way each year.
Dividends paid are not included in the calculation of the profit in the SOPL and IAS 7 (and therefore the Paper FA exam) allows them to be shown either as a separate item under cash flows from operating activities, or under cash flows from financing activities. (As I do explain in my free lectures.) Again, the treatment should be the same each year.
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