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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Researching Accounting Standards: Dissenting Views and the Statement of Cash Flows

The preparation of cash flow statements is required by generally accepted accounting principles. This accounting standard was initially adopted by a four-to-three vote of the FASB. Several members of the Board took exception to various aspects of the statement including (1) the classification of interest and dividends received and interest paid as cash flows from Operations and (2) the use of the indirect method.

Required:

Obtain the Statement of Financial Accounting Standards No. 95 (FAS 95) from the FASB website. Go to www.fasb.org, highlight the “Standards” tab, select “Pre-Codification Standards,” select “Statement of Financial Accounting Standards No. 95,” and click on the “As Issued” link.

How did dissenting members of the FASB prefer that interest and dividends received and interest paid be classified? (See the section following paragraph 34 of the full text of Statement No. 95.) How did the FASB justify classifying these items as cash flows from operations?

(See paragraph 90 of Statement No. 95.)

To determine

In the FAS, This Statement necessitates that an announcement of money streams characterize money receipts and installments as indicated by whether they come from working, contributing, or financing exercises and gives meanings of every classification.

"A full set of financial statements for a period should show: Cash flows during the period."

To discuss:

How did dissenting members of the FASB prefer that interest and dividends received and interest paid be classified?

How did the FASB justify classifying these items as cash flows from operations?

Explanation

Since the indirect method does not bring about revealing independently real classes of gross working money streams, Messrs. Lauver and Swieringa trust that method is conflicting with the end in section 11 that " by and large, data about gross measures of money receipts and money installments amid a per...

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