What Method Does AASB 107 Encourage for the Reporting of Cash

question 42

Multiple Choice

What method does AASB 107 encourage for the reporting of cash flows from operating activities and what does it mean for the presentation of this category in the statement of cash flows?

• A) The derivative method is required. This means that the amounts are presented as increases or decreases in balance sheet working capital accounts.
• B) The indirect method is required. This means that the cash flows are presented as accrual amounts from the operating section of the statement of comprehensive income adjusted for non-cash effects.
• C) The direct method is required. This means that the gross cash flows from operating items are presented.
• D) Either the derivative or the direct method is required. For the derivative method this means that the amounts are presented as increases or decreases in the statement of financial position or for the direct method, this means that the gross cash flows from operating items presented is permitted

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Definitions:

Endorsement

The signing of one’s name on the back of a negotiable instrument for the purpose of negotiating it to another.

Premiums

Payments made regularly to an insurance company in exchange for coverage, representing the cost of the insurance policy.

Co-insurance Clause

A provision in insurance policies requiring the policyholder to bear a portion of the loss by maintaining coverage of a specified percentage of the value of the property to receive full reimbursement.

Fireproof

The quality of being resistant to or capable of withstanding damage by fire.