Sterling Corporation prepares its financial statements in accordance with IFRS. Sterling paid $10,000 of interest during the year. Sterling must report these finance costs on the statement of cash flows

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Moises Duke

Business

1 February, 04:42

Sterling Corporation prepares its financial statements in accordance with IFRS. Sterling paid $10,000 of interest during the year. Sterling must report these finance costs on the statement of cash flows

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Marquis Williams · Answer 1

The Option B is correct.

Explanation:

The International Financial Reporting Standards gives two option to report the finance costs in the statement of cash flow. The first option the firm has is that the finance cost must be reported in the operating activities because these interest cost arise because firm borrows money to finance its operations. The other option is the firm has option to include it in the financing section of the statement of cash flows because it might had invested in stocks which must be deducted from the financing activities.

Whatever the option firm choses must relate to the facts and must increase the truth and fairnes of the statement and it must also applied consistently in future as well. US GAAP says that the finance cost must be deducted from the operating activities in the statement of cash flows.