IFRScommunity.com

Hi everyone.

I encountered an issue regarding cash flow classification and I really don't know why.
IAS 7 p. 34 states that dividends paid can be classified as operating cash flow, the exact wording is

"Alternatively, dividends paid may be classified as a component of cash flows from operating activities in order to assist users to determine the ability of an entity to pay dividends out of operating cash flows."

This words does not make sense to me. It seems that US GAAP specifies dividends paid as financing cash flow.
I tried to search the Internet but could not find an answer. That is why I am here.
Thank you for your time reading this post and it would be great if you share your thoughts.

Best regards,
Pluie

Pluie wrote: ↑27 Oct 2021, 11:50 I tried to search the Internet but could not find an answer.

and what is the question?

Dividends paid may be classified as a financing cash flow because they are a cost of obtaining financial resources. Alternatively, dividends paid may be classified as a component of cash flows from operating activities in order to assist users to determine the ability of an entity to pay dividends out of operating cash flows.

Marek Muc wrote: ↑27 Oct 2021, 12:54

Pluie wrote: ↑27 Oct 2021, 11:50 I tried to search the Internet but could not find an answer.

and what is the question?

Sorry for not making myself clear. The question is that this does not seem to fit the logic of classifications. Why would paying dividends be part of the operation activities? Would be grateful if there is any example of financial reports that justify their position of this classification.

well, you quoted the rationale in your first post this approach is quite common!

but the IASB proposes to change this rule in IFRS: https://www.ifrs.org/content/dam/ifrs/p ... osures.pdf

Wow, this document provides some very useful information. Thank you so much.