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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.

Why did dissenting members of the FASB take exception to the indirect method? (See the section following paragraph 34 of the full text of Statement No. 95.) How did the FASB justify permitting use of the indirect method? (See paragraphs 108, 109, and 119 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:

Discuss the dissenting member of the FASB take exception to the indirect method?

How did the justify permitting use of the indirect method?

Explanation

This Statement along these lines urges ventures to pursue that approach. In any case, most suppliers and clients of fiscal summaries have practically no experience and just restricted recognition with the immediate method, while both have broad involvement with the indirect method...

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