Interest is in CFO Right?

CFA Level I
#1

One I got wrong last night and lost it on my computer. Question said interest would be an investing cash flow for a manufacturing company.

#2

CFO or CFF (interest paid), CFO or CFI (interest received) under IFRS, only CFO under US GAAP. Milos

#3

Milosh will you please say that one more time, a little more clearly. I didn’t understand what you wrote

#4

Yeah, GAAP and IFRS are used often on those CFAI exams. Thats why I f’’'ed it up!

#5

Under IFRS: Interest paid can be classified as CFO or CFF, while interest received can be classified as CFO or CFI Under US GAAP: Interest received and paid is always classified as CFO. Before answering or doing any computation look for something like “assume US GAAP” or “assume IFRS”. Milos

#6

What about interests in capital leases? From the lessees view… Consider US-GAAP. Aren’t they nonoperating?

#7

cfaisok Wrote: ------------------------------------------------------- > What about interests in capital leases? From the > lessees view… > > Consider US-GAAP. Aren’t they nonoperating? it depends if it is a sale-type lease of financing-lease

#8

If the interest is capitalized, wouldnt it be CFI?

#9

@strange: it’s the lesees view… So there is no sales-type / direct financing lease? I think. Isn’t it CFF?

#10

In capital lease: interest payment CFO part of the principal payment CFF Operating lease: the expense (rent) goes to CFO Note: Sorry I didnt realized we were talking on a lesee view.

#11

So it’s an error on page 523, volume 3, cfai. They declared depreciation as operating expense and interest as nonoperating. See first table on the page.

#12
  1. Interest is a non-opearting item unless it is a financing company. 2) Interest payment is always CFO with principal payment counted as CFF.
#13

Yeah, they love to trick you with those banks!

#14

cfaisok Wrote: ------------------------------------------------------- > So it’s an error on page 523, volume 3, cfai. > > They declared depreciation as operating expense > and interest as nonoperating. > > See first table on the page. In the office at the moment…I cant see any book