Where the Entity Uses the Direct Method a Note to the Accounts

question 56

Multiple Choice

Where the entity uses the direct method a note to the accounts reconciling cash flows from operating activities to net profit is required because:

• A)Complex calculations are required to convert cash-based revenues.
• B)Items such as depreciation are only recorded in a cash system and not an accrual system.
• C)There is likely to be a disparity between cash flows from operations under IAS 7 and the profits reported in the statement of comprehensive income.
• D)The direct method is required under IAS 7.

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Definitions:

Restatement

The act of expressing the same idea or fact in different words, often to clarify or emphasize.

Clarification

The process of making something clear or understandable by providing more details or simplifying the explanation.

Reflection

Reflection refers to the return of light, heat, sound, or energy from a surface, or the act of serious thought or consideration.

Clarification

A process of making something less confusing or more comprehensible by providing more details or explanation.