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A brief on the differences
Introduction
This topic covers cash flow statements as covered under AS 3 and IAS 7. The
two standards are quite similar. The differences pertain to scope, definitions
and presentation of the statements.
Scope
Definitions
Form and Presentation
Disclosures
Scope
Broadly, AS 3 covers all entities except certain
entities in the SME sector. The cash flow
statement is a mandatory part of the financial
statements.
There are a few minor differences - for example, AS 3 specifies that interest
and Dividend paid will be classified as financing activities while interest and
dividends received will be financing activities (in case of non financial
entities). However, there is no such stipulation under IAS 7 which allows
the above to be classified as operating, investing or financial as long as
consistency is maintained across periods.
Form & Presentation
The approach can be either direct or indirect under both the
standards. The direct method works on data taken straight from
the accounting records while in case of the indirect method, we
commence with the profit or loss and adjusts for items like
depreciation etc. The direct method is encouraged/
recommended by both the standards.