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Hi Tutor,
Please reply if interest paid for debentures is an operating activity or financial activity
I hope Interest paid on debentures is a financial activity but in the format of cash flows as per IAS 7, interest paid is shown in operating activities.
Repayment of debentures is shown as a negative figure in financial activities and why payment of interest for debentures is not deducted in financial activities.
Thanks in advance
Hi,
Interest paid appears within the operating activities section alongside the tax paid figure. Your thought process is correct in that it is linked to the issue of the debentures but the standard takes the approach that the payment is a mandatory one and the user needs to see that the cash flow from operations is sufficient to cover the mandatory payments (interest and tax). It is therefore included within the operating activities section.
Thanks
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