For the current year, Packers Company decided to switch from the indirect method to the direct method for reporting cash flows from operating activities on the statement of cash flows. Will the change cause the amount of net cash flow from operating activities to be larger, smaller, or the same as if the indirect method had been used?

Question

Ciara Rogers

Business

30 July, 22:22

For the current year, Packers Company decided to switch from the indirect method to the direct method for reporting cash flows from operating activities on the statement of cash flows. Will the change cause the amount of net cash flow from operating activities to be larger, smaller, or the same as if the indirect method had been used?

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Lindsay Gonzales · Answer 1

As we know that the cash flow statement should be determined by two methods

1. Direct method

2. Indirect method

The direct method records the all cash revenues and all cash expenditures in the operating activities

Whereas the indirect method records the net income after considering the depreciation expense, loss or gain on sale of fixed assets, change in working capital, etc

The investing and the financing activities should be remain same under both the methods

So, there is a same values comes if computed by both the methods