Page 144 - F1 Integrated Workbook STUDENT 2018
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Chapter 9
3.10 Comparison of the methods
IAS 7 encourages, but does not require, the use of the direct method
Indirect method
– The reconciliation highlights the fact that profit and cash are not equal.
– Does not show significant elements of trading cash flows.
– Low cost in preparing the information.
Direct method
– Discloses information not shown elsewhere in the financial statements.
– Shows the cash flows from trading.
– Gives the users more information in estimating future cash flows.
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