(Solution Download) The preparation of cash flow statements is required by Statement


The preparation of cash flow statements is required by Statement of Financial Accounting Standards No. 95, ''The Statement of Cash Flows,'' adopted by a four-to-three vote of the FASB. Several members of the Board took exception to various aspects of the statement, including
(1) The classification of interest and dividends received and interest paid as cash flows from operations and
(2) The use of the indirect method.

Required:
Obtain a copy of Statement of Financial Accounting Standards No. 95 (FAS 95) from the FASB website. This can be obtained by:
a. Entering the following web address in your browser: http://www.fasb.org
b. Selecting ''Pronouncements and EITF Abstracts'' from the menu at the left.
c. Selecting ''Statement of Accounting Standards No. 95'' Answer the following questions:
1. How did dissenting members of the FASB prefer that interest and dividends received and interest paid be classified? How did the FASB justify classifying these items as cash flows from operations?
2. Why did dissenting members of the FASB take exception to the indirect method? How did the FASB justify permitting use of the indirect method?

 







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