Other accounting and reporting topics
14.8. Statement of cash flows
Differences exist between the frameworks for the presentation of the statement of cash flows that could result in differences in the actual amount shown
as cash and cash equivalents in the statement of cash flows as well as changes to each of the operating, investing, and financing sections of the statement of
cash flows.
IFRS
As per IAS 7 Statement of Cash Flows, a
company can present cash flows from
operating activities using either the direct
method or the indirect method.
Cash and cash equivalents may also
include bank overdrafts repayable on
demand that form an integral part of an
entity’s cash management. Short-term
bank borrowings are not included in cash
or cash equivalents and are considered to
be financing cash flows.
Only expenditures that result in a
recognized asset are eligible for
classification as investing activities.
Interest and dividends received should be
classified in either operating or investing
activities. Interest and dividends paid
should be classified in either operating or
financing cash flows. IFRS does not
specify where interest capitalized under
IAS 23 is classified. The total amount of
interest paid during a period, whether
expensed or capitalized, is disclosed in
the statement of cash flows. Once an
accounting policy election is made, it
should be followed consistently.
338
US GAAP
ASC Topic 230 Statement of Cash
Flows allows a reporting entity to
prepare and present its statement of
cash flows using either the direct or
indirect method (discussed in detail
in the next section), though the
guidance encourages using the direct
method.
Bank overdrafts are not included in
cash and cash equivalents; changes in
the balances of bank overdrafts are
classified as financing cash flows.
There is no requirement for
expenditures to be recognized as an
asset in order to be classified as
investing activities.
The guidance is specific on the cash
flow classification of certain items,
requiring dividends paid to be
classified in the financing section of
the cash flow statement and
requiring interest paid (and
expensed), interest received, and
dividends received to be classified as
cash flows from operations. Interest
capitalized relating to borrowings
that are directly attributable to
property, plant, and equipment is
classified as cash flows from
investing activities. If the indirect
method is used, amounts of interest
Ind AS
Similar to IFRS. However,
Regulation 34(2) and 53(b) of the
SEBI Listing Regulations, 2015
requires listed companies to use
only the indirect method.
Similar to IFRS except the
following in case of entities other
than financial institutions:
 Interest paid and interest
and dividends received to
be classified as item of
financing activity and
investing activity,
respectively; and
 Dividend paid is to
be classified as a part of
financing activity only.
Indian GAAP
Similar to IFRS except AS 3 does
not apply to SMCs. However,
Regulation 34(2) and 53(b) of the
SEBI Listing Regulations, 2015
requires listed companies to use
only the indirect method.
Bank overdrafts are not included
in cash and cash equivalents;
changes in the balances of bank
overdrafts are classified as
financing cash flows.
There is no specific requirement
for expenditures to be recognized
as an asset in order to be
classified as investing activities.
Similar to Ind AS, cash flows
arising from interest paid and
interest and dividends received in
the case of a financial enterprise
should be classified as cash flows
arising from operating activities.
In the case of other enterprises,
cash flows arising from interest
paid should be classified as cash
flows from financing activities
while interest and dividends
received should be classified as
cash flows from investing
activities. Dividends paid should
be classified as cash flows from
financing activities.
PwC
Other accounting and reporting topics

IFRS US GAAP Ind AS Indian GAAP

paid (net of amounts capitalized)
during the period must be disclosed.

Taxes:
Taxes paid should be classified within
operating cash flows unless specific
identification with a financing or
investing activity exists.
Taxes paid are generally classified as Similar to IFRS. Similar to IFRS.
operating cash flows; specific rules
exist regarding the classification of
the tax benefit associated with share-
based compensation arrangements.
Refer to SD 14.54 Recent/proposed
guidance, for details on the changes
in classification on the statement of
cash flows due to the issuance of ASU
2016-09
If the indirect method is used,
amounts of taxes paid during the
period must be disclosed.

Changes in ownership interest:

Cash flows from changes in ownership
interest without loss of control treated as
financing activities.
Cash paid to acquire a non-
controlling interest, or cash received
from the sale of a non-controlling
interest, should be presented as a
financing activity when the parent
maintains control of the subsidiary.
Similar to IFRS. AS 3 does not contain any
specific guidance. Generally, the
aggregate cash flows arising from
acquisitions and disposals of
subsidiaries or other business
units are presented separately
and classified as investing
activities.

Foreign operations:
Under IAS 7, cash flows of foreign
subsidiary should be translated using the
exchange rate on the date of cash flows.
However, as a practical measure, average
rates can be used.
Cash flows of operations in foreign
subsidiary should be reported in the
reporting currency using the
exchange rates in effect at the time of
the cash flows. If the pattern of cash
flows and exchange rates are
relatively consistent throughout the
period, the reporting entity may use
Similar to IFRS. No specific guidance on
consolidated cash flows.
However, in practice the
accounting/presentation would
be similar to IFRS.

PwC 339

IFRS
Extraordinary items:
Presentation of extraordinary items is not
permitted. Hence, the cash flow
statement does not reflect any items of
cash flow as extraordinary.
Acquisition of equipment for use or
for rental to others:
Entities sometimes acquire or produce
equipment for use or for rental to others
for a short period and then sold. In those
circumstances, the acquisition or
production and subsequent sale of those
assets shall be considered
operating activities.
340
Other accounting and reporting topics
US GAAP Ind AS Indian GAAP
an average exchange rate for
translation, as the cash flow results
would not be significantly different
from the result if actual exchange
rates on the day of the cash flows
were used.
Similar to IFRS. Similar to IFRS. Cash flows arising from
extraordinary items should be
classified as arising from
operating, investing or financing
activities as appropriate and
separately disclosed.
When the cash flow has aspects of Similar to IFRS. No specific guidance.
both operating and investing
activities, the entity would need to
determine the nature of the activity
that is likely to be the predominant
source of cash flows in order to
determine how that cash flows
should be classified. For example
assume an entity expects to rent new
equipment for only a short period of
time before selling them, and
therefore the amount of cash flows
that the entity expects to receive from
rental income as compared to the
proceeds expected to receive from the
sale of the equipment is relatively
small. In such circumstances, the
equipment would appear to have the
nature of an inventory item, and
accordingly the cash flows related to
the purchase and sale of the
PwC
Other accounting and reporting topics

IFRS US GAAP Ind AS Indian GAAP

equipment should be classified as
operating activities. If, however, the
entity expects to rent the new
equipment for a longer period of time
before selling them, and the amount
of cash flows that is expected to be
received from rental income as
compared to the proceeds received
from the sale of the equipment is
relatively large, then the equipment
have the nature of a long-lived asset.
In this case, the cash flows related to
the purchase and sale of the
equipment should be classified as
investing activities.

14.9. Comparative financial information

IFRS/Ind AS and Indian GAAP specifies the periods for which comparative financial information is required, which differs from both US GAAP and
SEC requirements.

IFRS US GAAP Ind AS Indian GAAP

One year of comparatives is required for
all numerical information in the financial
statements, with limited exceptions in
disclosures. In limited circumstances,
notes and the statement of equity (where
a reconciliation of opening and closing
positions are required), more than one
year of comparative information is
required.
A third statement of financial position at
the beginning of preceding period is
required for first-time adopters of IFRS
and in situations where a retrospective
Comparative financial statements are
not required; however, SEC
requirements specify that most
registrants provide two years of
comparatives for all statements
except for the balance sheet, which
requires only one comparative year.
Ind AS provides guidance similar
to IFRS. Further, as per Schedule
III (Division II), the financial
statements shall also contain the
corresponding amounts
(comparatives) for the
immediately preceding reporting
period for all items in the
financial statements
including notes.
While the accounting standards
do not require disclosure of
corresponding amounts, as per
Schedule III (Division I), the
financial statements shall
contain the corresponding
amounts (comparatives) for the
immediately preceding reporting
period for all items in the
financial statements
including notes.
Unlike IFRS/Ind AS, there is no
requirement to provide third

PwC 341