True or False question

Question

Information about noncash investing and financing activities must be disclosed in a schedule that is separate from the statement of cash flows.

Answer 1

The wording does not permit a precise true or false answer. True is probably the expected correct answer. Significant transactions not involving cash are reported at the bottom of the cash flow statement after the last item which is the change in cash for the period, separately from the statement itself. Whether you call that a separate schedule is not clear. Examples of such disclosure may be:

 

Significant transactions not affecting cash:

Equipment in the amount of $23,000 was obtained in exchange for bonds payable.

Land costing $18,000 was disposed of in exchange for a mortgage note in the amount of $$22,000.

 

The last item results in a gain that is disclosed in the income statement and is deducted from net income to arrive at cash from operations using the indirect method.