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Financial Statement Analysis - cash flow analysis II

CFA Level I

Time stamp pertaining to the previous query ( why is expense as shown in income statement not considered while adjusting for non cash and non operating expenses) is at 09:50 Video Details Financial Statement Analysis - CFA Level 1 Financial Statement Analysis 15. Analysing Statements of Cash Flow - II

Vasudha TK

CFA L1

★ 0

20-Mar-24 21:13

Answers (2)

concerned Faculty will revert in some time

Sriram Somayajula

Admin

21-Mar-24 07:19

We have adjusted for non-cash items from P&L in the cash flow statement such as Depreciation. The other items under the expenses such as COGS, wages and interest are treated as operating cash items, therefore not reversed. With respect to interest expenses, there is a slight difference in treatment under IFRS and US GAAP. While IFRS has more flexibility to classify interest paid as either a operating activity or financing activity, US GAAP specify it to be classified as an operating activity. The example that is being discussed in the video is pertaining to US company, therefore we have not added back interest costs.