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108 Corporate Finance BRILLIANT’S

and dividend received should be classified as d {S>{dS>oÝS> H$s àmpßV H$mo BÝdopñQ>¨J EpŠQ>{dQ>rO go CËnÝZ
cash flows from investing activities. Some argue H¡$e âbmo Ho$ ê$n _| dJuH¥$V H$aZm Mm{h`o& Hw$N> {dÛmZm|
that interest paid and interest and dividend H$m VH©$ h¡ {H$ B§Q>aoñQ> Ho$ no_|Q> VWm B§Q>aoñQ> d {S>{dS>oÝS>
received may be classified as operating cash H$s àmpßV H$mo Am°naoqQ>J EpŠQ>{dQ>rO go CËnÝZ H¡$e âbmo
flows because they enter into the determination Ho$ ê$n _| dJuH¥$V {H$`m Om gH$Vm h¡ Š`m|{H$ do ZoQ>
of net profit or loss. However, it is more àm°{\$Q> `m bm°g Ho$ {ZYm©aU _| gpå_{cV {H$`o OmVo h¢Ÿ&Ÿ
appropriate to classify them as financing and {H$ÝVw gm_mÝ`V… B§Q>aoñQ> d {S>{dS>oÝS> Ho$ ^wJVmZ Ed§ àmpßV
investing activities respectively because they H$mo H«$_e… \$m`ZopÝg¨J Ed§ BÝdopñQ>¨J EpŠQ>{dQ>rO go CËnÝZ
are cost of obtaining finance and return on H¡$e âbmo hr _mZm OmVm h¡ Š`m|{H$ `o BÝdoñQ>_|Q> na {aQ>Z©
investments. VWm \$m`Z|g [agmog}g àmßV H$aZo H$s H$m°ñQ> hmoVo h¡Ÿ&
In case of financial enterprises, interest \$m`ZopÝe`b B§Q>aàmBOog Ho$ Ho$g _|, B§Q>aoñQ> Ho$
paid and interest and dividend received should ^wJVmZ VWm B§Q>aoñQ> d {S>{dS>oÝS> H$s àmpßV H$mo Am°naoqQ>J
be classsified as cash flows arising from EpŠQ>{dQ>r go CËnÝZ H¡$e âbmo Ho$ ê$n _| dJuH¥$V {H$`m
operating activities. Dividend paid should be OmZm Mm{h`o {S>{dS>oÝS> Ho$ ^wJVmZ H$mo \$m`ZopÝg¨J
classified as cash flows from financing EpŠQ>{dQ>rO go CËnÝZ H¡$e âbmo Ho$ ê$n _| dJuH¥$V {H$`m
activities. NPP OmZm Mm{h`oŸ&
3. Taxes on Income: Cash flows arising 3. BÝH$_ na Q>¡Šg: BÝH$_ na Q>¡Šg go CËnÝZ
from taxes on income should be separately H¡$e âbmoO H$mo AcJ go àH$Q> {H$`m OmZm Mm{h`o VWm
disclosed and should be classified as cash flows Bgo Am°naoqQ>J EpŠQ>{dQ>rO go CËnÝZ H¡$e âbmo _mZZm
from operating activities unless they can be
specifically identified with financing and Mm{h`o O~ VH$ {H$ BZH$s nhMmZ ñnï> ê$n go \$m`ZopÝg¨J
investing activities. Ed§ BÝdopñQ>¨J EpŠQ>{dQ>rO Ho$ ê$n _| Z H$a cr JB© hmoŸ&
Taxes on income arises on transactions BÝH$_ na Q>¡Šg CZ Q´>m§OoŠeÝg Ho$ H$maU CËnÝZ hmoVm
that give rise to cash flows that are classified h¡ Omo H¡$e âbmoO _| d¥{Õ H$aVo h¢ VWm {OÝho H¡$e âbmo ñQ>oQ>_|Q>
as operating, investing or financing activities _| Am°naoqQ>J, BÝdopñQ>¨J `m \$m`ZopÝg¨J EpŠQ>{dQ>rO Ho$ ê$n _|
in a cash flow statement. While tax expense dJuH¥$V {H$`m OmVm h¡Ÿ& Q>¡Šg EŠgn|gog H$mo BÝdopñQ>¨J `m
may be readily identifiable with investing or
financing activities, the related tax cash flows \$m`ZopÝg¨¨J EpŠQ>{dQ>rO Ho$ ê$n _| dJr©H¥$V {H$`m Om gH$Vm
are often impracticable to identify and may h¡ {H$ÝVw g§~§{YV H¡$e âbmo H$s nhMmZ _wpíH$c hmoVr h¡ Am¡a
arise in a different period from the cash flows `o H¡$e âbmo _| {Z{hV H$m`m] Ho$ Xm¡amZ CËnÞ hmo gH$Vo h¢Ÿ&
of the underlying transactions. Therefore, taxes gm_mÝ`V: Q>¡Šg Ho$ ^wJVmZ H$mo Am°naoqQ>J EpŠQ>{dQ>rO go CËnÝZ
paid are usually classified as cash flows from H¡$e âbmo Ho$ ê$n _| dJuH¥$V {H$`m OmVm h¡Ÿ{H$ÝVw `{X
operating activities. However, when it is
practicable to identify the tax cash flow with {H$gr {d{eï> Q´>m§OoŠeÝg Ho$ gå~ÝY _| H¡$e âbmo H$mo BÝdopñQ>¨J
an individual transaction that gives rise to cash `m \$m`ZopÝg¨J EpŠQ>{dQ>rO go CËnÝZ _mZZm ì`mdhm[aH$ àVrV
flows that are classified as investing or hmoVm hmo Vmo Q>¡Šg go CËnÝZ H¡$e âbmo H$mo ^r BÝdopñQ>¨J `m
financing activities, the tax cash flow is \$m`ZopÝg¨J EpŠQ>{dQ>rO Ho$ ê$n _| dJr©H¥$V {H$`m Om gH$Vm
classified as an investing or financing activity h¡Ÿ& `{X Q>¡Šg go CËnÝZ H¡$e âbmo H$mo EH$ go A{YH$
as appropriate. When tax cash flows are
EpŠQ>{dQ>rO Ho$ ê$n _| dJuH¥$V {H$`m J`m hmo Vmo Q>¡Šg Ho$ ê$n
allocated over more than one class of activities,
the total amount of taxes paid is disclosed. _| MwH$m`r JB© Hw$c am{e àH$Q> H$s OmZr Mm{h`oŸ&