Question

Hi! I would love to get some help with this Air France question. I would love to post the link to these statements but I got in trouble last time I did that??? Apparently, it's against the rules or something. To find the link, just type up Air France air France 2015 consolidated financial statement and scroll until you find the 2015 Consolidated financials. For me, it was the 3rd or fourth result!! I really need help with this one so I highly appreciate it!

http://www.airfranceklm.com/sites/default/files/communiques/consolidated_financial_statements_2015.pdf

Air France-KLM Case LO21-9 @皇IFRS AIRFRANCE KLM Air France-KLM (AF), a Franco-Dutch company, prepares its financial statements according to International Financial Reporting Standards. AF's financial statements and disclosure notes for the year ended December 31, 2015, are provided in Connect. This material is also available under the Finance link at the company's website (www.airfranceklm- finance.com) Required 1. What are the primary classifications into which AF's cash inflows and cash outflows are separated? Is this classification the same as or different from cash flow statements prepared in accordance with U.S. GAAP? 2. How are cash inflows from dividends and interest and cash outflows for dividends and interest classified in AF's cash flow statements? Is this classification the same as or different from cash flow statements prepared in accordance with U.S. GAAP?

Answer 1

What is the primary classification into which AF's cash inflows and cash outflows are separated? Is this classification the same as or different from cash flow statements prepared in accordance with US GAAP? There are three types of activities both under U.S. GAAP and IFRS. These activities are 1) Operating Activities 2) Investing Activities 3) Financing Activities outflows are separated. The cash flows statement prepared under these activities are different from cash flow statements prepared in accordance with U.S GAAP However, there is only difference in regarding to outflows of interest and dividend and inflows of dividend and interest. Under US GAAP cash inflows for receipt of interest and dividends and cash outflows for payment of interest is shown under the heading of operating activities and the cash outflows for the payment of dividends are classified as financing activity. Whereas under IFRS cash inflows for receipt of interest and dividend are shown under the heading of Investing activity and cash outflows for the payment of interest and dividends are shown as financing activities

Solution of 2nd question The AFK Company prepares its statement of cash flows in accordance with IFRS because it classified the cash inflows for receipt of interest and dividend are shown under the heading of investing activity and cash outflows for the payment of interest and dividends are shown as financing activities. But according to IAS No.7 it has the flexibility for classifying its cash inflows from interest and dividend as operating or investing activities and cash outflows for payment of dividend and interest as operating or financing activities. Whereas under U.S.GAAP it has no flexibility and companies reporting cash flows statement under U.S. GAAP has to classify both interest paid and interest received and also dividend received under operating activities and payment of dividend under financing activities