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CFA Level 1 Question of the Week – Financial Reporting and Analysis

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    • Avatar of Matt_AnalystPrepMatt_AnalystPrep
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        • CFA Charterholder
        17 Dec 2019 at 12:04 am
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        According to US GAAP, interests incurred on a capital lease are most likely classified under:

        • A. cash flow from operating activities.
        • B. cash flow from financing activities.
        • C. either cash flow from operating or financing activities.
      • Avatar of Matt_AnalystPrepMatt_AnalystPrep
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          20 Dec 2019 at 9:48 am
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          The correct answer is A.

          An interest expense is classified as a cash outflow from operating activities under US GAAP.

          Note: IFRS allows the option to classify it either as a financing activity or an operating activity.

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