Treatment of Interest & Dividend in Statement of cash flow as per IAS 7

Treatment of Interest and dividend treatment in IAS 7

• Cash flow from interest and dividends received and paid must be disclosed separately.
• Everything should be classified as operational, investment or financial activity from time to time.
• Whether the total interest paid over a period is recognized as an expense in the statement of income in the cash flow statement, or whether the IAS 23 loans are invested in a cost-effective alternative treatment.
• Interest received and interest and dividends received are generally classified as operating cash flows to the financial institution. However, other companies have no consensus on the classification of these cash flows. Received interest and interest and dividends received may be classified as operating cash flows when entered into a determination of profit or loss.
• Alternatively, interest payments and accrued interest dividends can be classified as financing and cash flows into cash, respectively, because they are the cost of obtaining financial resources or the return on investment.
• Paid dividends can be classified as financing cash flows because of the cost of acquiring financial resources.
• Alternatively, paid dividends can be classified as a component of cash flows from operating activities, assisting customers in determining the company's ability to pay dividends from operating cash flows.