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Interest

In general, cash flows rising from interest paid should be classified as cash flows from financing activities, say interest on loans/debts, interest paid on working capital loan and any other loan taken to finance operating activities are to be shown as a pan of operating activities. (Unless stated otherwise, interest paid is to he reported with financing activities).

Interest received from short-term investments classified as cash equivalents) are to be reckoned as cash inflows from operating activities.

Cash flows arising from interest paid and interest received in the case of a financial enterprises should be classified as cash flows from operating activities. The reason is borrowing and lending are the normal business activities for such enterprises.

Posted by: andy

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