Reconciliation?

In order to be awarded CPD units you must answer the following five random questions correctly. If you fail the test, please re-read the article before attempting the questions again.

  1. IAS 7 Statement of Cash Flows was first published in 1992 and allows users of financial statements to assess how different types of activity affect the financial position of a company by classifying cash flows accordingly. Which of the following classifications is not required by IAS 7?

  2. The operating activities in the cash flow statement can be presented in one of two ways. The direct method and the indirect method. Which of the following statements is incorrect concerning the direct and indirect methods?

  3. If net income is higher than the operating cash flow, a user would seek further explanations as to the reasons for this occurrence. The presentation of operating profit under the indirect method is the starting point for the calculation of operating cash flow. What is the starting point, under the indirect method, for the calculation of operating cash flow?

  4. Free cash flow is used by analysts in various valuation models and is thought to be a better measure than using the figure for operating cash flow. What is the common definition of free cash flow?

  5. There are concerns over the current classification of items in the statement of cash flows. Which of the following statements is not a current classification issue?

  6. Some argue that research and development cash outflows should be included within investing activities, because they relate to items which are intended to generate future income and cash flows. What is the view of IAS 7 regarding the classification of investing cash flows?

  7. Some items of property, plant and equipment (PPE) are purchased from suppliers on similar credit terms to those for inventory and for amounts payable to other creditors. As a result, transactions for property, plant and equipment may be incorrectly included within changes in accounts payable for operating items. Under what heading should purchases of PPE be shown in the statement of cash flows?

  8. There are currently different views as to how to show lessee cash flows in the statement of cash flows. Which of the following views is not one commonly held by users?

  9. In December 2014,the IASB published an Exposure Draft (ED), which proposes amendments to IAS 7. What are the main objectives of the ED?

  10. For a number of years, users have been requesting the IASB to require companies to provide net debt reconciliation. How will the proposed amendment to IAS 7 help users in this regard?