Which of the following would be recorded as a cash inflow from investing activities on the statement of cash flows? a. Gain on the sale of long-term assets. b. A period-to-period decrease in inventory. c. Proceeds received from the divestiture of a business. d. Interest received on “held-to-maturity” marketable debt securities. I picked C (which is the right answer), but to me A would also be correct. Stalla says: “Choice “a” is incorrect. A gain on the sale of long-term assets is reported on the income statement. This gain is backed out (subtracted) from net income in the operating activities section of the statement of cash flows under the indirect method. The related cash proceeds, however, would be reported as a cash inflow under investing activities.” Isn’t this answer stating that A would in fact be recorded as a cash inflow from investing activities on the statement of cash flows?
i remember this question. it’s never gain on the sale which depends on accounting principles used but rather cash inflow from the sale or the price of the asset sold.
OK, that makes sense, I didn’t read into the “Gain” only part.
What about d? It might be able to count as investing by IFRS.
I think most of the CFA exam is geared towards the US GAAP, even if the IFRS is being discussed in the Level I (newly) this year. So unless they say IFRS specifically – I believe US GAAP would be the way to go (but I could be wrong)!!! CP
from what i remember it says on the exam to assume US GAAP before every question.
Wow, this is good to know, I would have said D based on IFRS too, they seem to stress it in the CFA books. Great.