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GAAP vs. IFRS: Statement of Cash Flows quiz

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  • Who sets the rules for GAAP and who sets the rules for IFRS?
    GAAP rules are set by the Financial Accounting Standards Board (FASB), while IFRS rules are set by the International Accounting Standards Board (IASB).
  • What are the three main sections of the statement of cash flows under both GAAP and IFRS?
    The three main sections are operating, investing, and financing activities.
  • What are cash equivalents, and how quickly must they be convertible to cash under both GAAP and IFRS?
    Cash equivalents are highly liquid investments that can be converted into cash within 90 days.
  • Where does GAAP require significant non-cash investing and financing activities to be reported?
    GAAP requires these activities to be reported on the statement of cash flows.
  • Where does IFRS require significant non-cash investing and financing activities to be reported?
    IFRS requires these activities to be reported in the notes to the financial statements.
  • Under GAAP, in which section are interest paid and interest received generally classified?
    Under GAAP, both interest paid and interest received are classified as operating activities.
  • How does IFRS allow interest paid and received to be classified on the cash flow statement?
    IFRS allows interest paid and received to be classified as operating, investing, or financing activities, as long as the classification is consistent.
  • Under GAAP, how are dividends paid classified on the statement of cash flows?
    Dividends paid are classified as financing activities under GAAP.
  • How does IFRS allow dividends paid to be classified?
    IFRS allows dividends paid to be classified as either operating or financing activities, based on consistency.
  • Under GAAP, how are dividends received classified on the statement of cash flows?
    Dividends received are classified as operating activities under GAAP.
  • How does IFRS allow dividends received to be classified?
    IFRS allows dividends received to be classified as either operating or investing activities.
  • How are taxes paid generally classified under GAAP and IFRS?
    Taxes paid are generally classified as operating activities under both GAAP and IFRS.
  • Under what condition does IFRS allow taxes paid to be classified outside of operating activities?
    IFRS allows taxes paid to be classified as financing or investing activities if they relate specifically to those activities.
  • What flexibility does IFRS provide for presenting the operating section of the cash flow statement?
    IFRS permits the operating section to be presented as a single line item, with details provided in the notes.
  • Which set of rules should students focus on for introductory accounting courses, according to the transcript?
    Students should focus on GAAP rules for introductory accounting courses.