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.

IFRS vs US GAAP: Statement of Cash Flows Classification

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

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 classify them as operating activities only.

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

Under IFRS, interest paid and dividends 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 dividends 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.

LAST UPDATE: 2 Nov 2023

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