Classification of expenditures in the cash flow statement
19 Feb 2008
We have written to express some disagreement with the basis for IFRIC's tentative decision not to interpet IAS 7 Statement of Cash Flows regarding the classification of certain expenditures as operating or investing.
We acknowledge that in many instances recognition of an asset is a good indicator for classifying the expenditure as investing cash flows. However, we believe requiring classification of all cash flows that do not result in asset recognition as operating cash flows has the potential to mislead users and possibly misrepresent the statement of cash flows. Furthermore, as a result of changes in IFRSs, if certain expenditures are recognised as an asset or no longer qualify for recognition, this will lead to changes in the allocation within the statement of cash flows without changing the economic substance of the underlying transactions. Examples of expenditures generally made for investing purposes that, under the IFRIC's proposal, we believe would be classified as part of 'cash flows from operating activities' include:
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