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IAS 7 And ASC 230 Compare Contrast Paper

680 Words3 Pages

According to IAS 7 and ASC 230, companies can use either the direct method or indirect method for the statement of cash flows. Brown-Forman Corporation and Diageo selected to use the indirect method, and the presentation format is similar. One difference between the two company is ASC 230 required Brown-Forman to reconcile net income to cash flows from operating activities regardless of which method it uses (Deloitte). IAS 7 only required reconciliation when using the indirect method, “the indirect method, whereby profit or loss is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments, and items of income or expense associated with investing or financing …show more content…

IAS 7 treat each component of the transaction individually; it states, “a single transaction may include cash flows that are classified differently” (IFRS 2012), Diageo classifies 479 million interests paid and 507 million taxes paid in the operating section. Brown-Forman record 28 million interest paid and 281 million taxes paid in the supplemental disclosure section. Both company record dividend paid in the financing section. Dividend received are recorded in the operating section for Diageo. Brown-Forman did not record any dividend …show more content…

Before the application of ASU 2014-08, companies do not need to disclose discontinued operation. After the application of ASU 2014-08, companies have two options in disclosing discontinued operations, “This update require additional disclosures about discontinued operations, including: the total operating and investing cash flows of the discontinued operation for the period in which the results of operations of the discontinued operation are reported in the statement where net income is reported,” (FASB 2014) or “the depreciation, amortization, capital expenditures, and significant operating and investing noncash items of the discontinued operation for the periods in which the results of operations of the discontinued operation are presented in the statement where net income is reported” (FASB 2014). Under IFRS, it requires cash flows related to discontinued operations from each category of activities be present in the statement of cash flows or in the notes of financial statements. IAS 5 state, “the net cash flows attributable to the operating, investing and financing activities of discontinued operations. These disclosures may be presented either in the notes or in the financial statement” (IFRS 2012). Diageo included 83 million cash inflow from discontinued operation in 2014. Brown-Forman did not record any cash flows from discontinued

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