- CFA Exams
- CFA Level I Exam
- Study Session 7. Financial Reporting and Analysis (2)
- Reading 23. Understanding Cash Flow Statements
- Subject 2. Preparing the Cash Flow Statement
CFA Practice Question
Under the direct method approach to cash flow statements, depreciation is ______
A. deducted from cash flows from operations.
B. added to cash flows from operations.
C. ignored in preparing the cash flow statement.
Explanation: When preparing the cash flow statement under the direct method, depreciation is ignored because the statement is prepared by reconstructing the income statement from a cash flow perspective. The statement starts with cash received from customers and works its way down through the income statement.
User Contributed Comments 2
| User | Comment |
|---|---|
| davcer | with the indirect method you star from NI and add depreciation |
| Inaganti6 | OK |