The FASB Classifies Interest Received on Investments and Interest Paid

question 65

Multiple Choice

The FASB classifies interest received on investments and interest paid on debt financing as part of operating cash flows while the IASB:

• A) allows interest received to be classified as either operating or investing and interest paid as either operating or financing.
• B) Allows interest received to be classified as either operating or financing and interest paid as either operating or investing.
• C) Allows interest received to be classified only as investing and interest paid only as financing
• D) Allows interest received to be classified only as financing and interest paid only as investing.

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Definitions:

Economic Profit

The difference between the firm’s total revenues and its total costs, including both the explicit and implicit cost components.

Economic Losses

Occur when a company's total costs exceed its total revenues, leading to negative profitability.

Break Even

The point at which total costs and total revenue are equal, resulting in no net gain or loss for a business.

Long-Run Economic Losses

Persistent negative financial outcomes for firms or the economy that occur over an extended period, often due to structural issues.