Level 1 CFA Exam: Statement of Cash Flows, Classification

CFA Exam Review / Statement of Cash Flows: Classification

This blog post was created as a part of the CFA exam review series to help you in your level 1 exam revision, whether done regularly or shortly before your CFA exam.

In this post, we discuss some basic differences between IFRS and U.S. GAAP regarding cash flow statement. Generally speaking, U.S. GAAP is more strict with respect to classifying different items into different cash flows.

Interested in other differences between IFRS and U.S. GAAP?
Check out our:

Level 1 & Level 2

Have a look at the table:

As you can see, IFRS are less restrictive. Both interest received and dividends received can be classified as operating or investing activities. U.S. GAAP allow to classify them as operating activities only.

Under IFRS, interest paid and dividend paid are classified either as an operating or as a financing activity. On the other hand, according to U.S. GAAP, interest paid is an operating activity and dividend paid is a financing activity.

Have a look also at taxes paid. U.S. GAAP always classify them as operating activities, but under IFRS a portion of tax expense can be allocated to investing or financing activities if it can be directly assigned there. You should also know that under IFRS bank overdrafts are part of cash equivalents. However, under U.S. GAAP, bank overdrafts are not cash or cash equivalents and are included in financing activities.

Interested in other differences between IFRS and U.S. GAAP?
Check out our:

Level 1 & Level 2

LAST UPDATE: 1 April 2022