Statement of Cash Flows F06-24b

Provide some comparisons of the direct and indirect method of presenting cash flow from operating activities.

1. The direct method presents cash flows in terms of the specific sources from which cash was received and to which cash was paid.
2. Indirect method shows operating activities by adjusting net income. Sources of cash inflows or outflows are not shown in the operating activities section.
3. Under either method, the cash flow from operating activities total will be the same amount.
4. Under either method, the major sections of the statement of cash flows will be the same.
5. The direct method is preferred by FASB.
6. Both methods require disclosure of the Noncash Investing and Financing activities.
7. Direct method requires an additional schedule to reconcile net income to cash flow from operating activities.
8. Indirect method requires an additional disclosure of the amount of cash paid for interest and income taxes paid.