Convert from Indirect Method to Direct Method

[JohnOwens]

Hi All,

In reviewing reading 27, LOS g of the 2015 course for CFA Level 1, I find myself wondering what’s the difference between CONVERTING from Indirect to Direct, and just putting together a new fresh Direct method from scratch.

Does anyone have a decent example of how CFO is built using the Indirect method, and then how that report is used to convert to the Direct method? I’m not overly happy with the explanation provided by the CFA textbook.

Thanks,

John

[S2000magician]

@JohnOwens

Hi All,

Howdy!

@JohnOwens

In reviewing reading 27, LOS g of the 2015 course for CFA Level 1, I find myself wondering what’s the difference between CONVERTING from Indirect to Direct, and just putting together a new fresh Direct method from scratch.

Not much difference.

@JohnOwens

Does anyone have a decent example of how CFO is built using the Indirect method, and then how that report is used to convert to the Direct method? I’m not overly happy with the explanation provided by the CFA textbook.

I wrote a couple of articles on CFO: direct method and indirect method:

• http://financialexamhelp123.com/cfo-direct-method/
• http://financialexamhelp123.com/cfo-indirect-method/

Alas, I haven’t anything specifically on converting from the latter to the former.\

@JohnOwens

Thanks,

My pleasure.

[JohnOwens]

Thanks S2000magician

Those articles actually do look quite good, but it’s the conversion process I’m struggling with. It really isn’t explained at all well why, or how someone would go about converting from indirect to Direct. I mean, if you have everything they use in the textbook, then surely you’d throw the Indirect cashflow report in the bin and just start a direct method from scratch.