879 words 4 pagesSolution 1 — Classification with the Statement of Cash Flows
Buck should present the borrowing and payment activity as a cash flow from financing activities.
ASC 230-10-45-14 states that “proceeds from issuing bonds, mortgages, notes, and from other short- or long-term borrowing” are a cash inflow from financing activities. Similarly, ASC 23010-45-15 states that “repayments of amounts borrowed” are a cash outflow for financing activities. Solution 2 — Gross versus net presentation
Net presentation is appropriate. Buck may classify the activity as a $50 million net cash inflow
($100 million in total draws less the $50 million repayment) within the financing activities section of the statement of cash flows. …show more content…
Under the provisions of Scenario 3, the only activities that Buck could potentially present net within its statement of cash flows are transactions occurring on or after October 1, 2012. Said differently, only draws occurring within three months of the Facility’s expiration would be considered to have original maturities of three months or less.
Solution 3 — IFRSs
Under IFRSs, IAS 7 is the primary source of guidance for determining how to present information about the cash flows of an entity within the financial statements. IFRSs and U.S.
GAAP are broadly consistent regarding net versus gross presentation. Similar to U.S. GAAP,
IFRSs generally require entities to present information about an entity’s amounts of cash receipts and cash payments during a period on a gross basis. However, in certain circumstances, IFRSs permit certain cash flow activities to be presented on a net basis.
Paragraph 22(b) of IAS 7 states that cash flows may be reported on a net basis when “cash receipts and payments for items in which the turnover is quick, the amounts are large, and the maturities are short.” This guidance is generally consistent with the provisions of ASC 230-1045-8. Further, paragraph 23A of IAS 7 provides the following examples of cash receipts and payments that may be presented net under the criteria set forth in paragraph 22(b):
a. principal amounts relating to credit card customers;
b. the purchase and sale of investments; and