Asked by steven remmenga on Jun 24, 2024
Verified
Current GAAP requires firms to use the direct method when preparing the operating activities section of the statement of cash flows because it is more informative and transparent.
Direct Method
A cash flow statement preparation approach that lists major categories of gross cash receipts and payments.
Current GAAP
The most up-to-date set of Generally Accepted Accounting Principles that companies are required to follow when preparing financial statements.
Operating Activities
refer to the primary revenue-generating activities of a business, including production, sales, and provision of services, reflected in its cash flow.
- Appreciate the nuances between the direct and indirect methods used in presenting cash flow from operating activities.
- Identify the requirements for reporting cash flows pertaining to specific transactions according to prevailing GAAP standards.
Verified Answer
Learning Objectives
- Appreciate the nuances between the direct and indirect methods used in presenting cash flow from operating activities.
- Identify the requirements for reporting cash flows pertaining to specific transactions according to prevailing GAAP standards.
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