How to depict accrued interest, interest payable etc in cash flow statement?
Will these be considered as non cash items in accordance with provisions of Para 40 and 41 of AS 3.
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Cash flow statement
Replies (5)
These are non cash items and are to be added to net profit if indirect method is used for computation of cash flows
The issue here is that in some PSU who receive loan from government, interest is payable on loan. However, interest is never paid by PSU to government. The same remain payable for nearly 10-15 years and then the interest is waived off by Government. In such case, interest payble on govt loan even though is a financing activity will never be classified under financing activity in cash flow statement. It will be always shown under operating activities (through change in assets and liabilities). Is there any solution in such situations
The treatment followed is in line with AS 3. I didn't get your query of is there any solution in such situations
As stated the interest payable on govt loan will be shown as operating activity for 10-15 years and will never be shown under financing activity. As this is a misrepresentation of nature of activity, what is the solution to show correct representation, if any.
Give a note in financials indicating the nature of this item
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