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The appropriate treatment of Cash flow in respect of the following items as per US GAAP & FASB - (230-10)
1. Receipt of Insurance settlement proceeds of $2 mill. From an international insurance carrier towards claim from the insurance company for loss due to destruction of old building is an Operating cash inflow item since it involves outflow of cash and it is deployed for operating uses, for DB pension purpose. Hence, Alternative No. 2 applies and holds good. Here, the cash is received immediately and hence the question of timing of the cash receipt does not arise. (As per ASC, 230 of US GAAP, FASB revised Statement No.95 & Codification 230-10 of FASB).
2. Capital equipment purchase of $12m on credit terms 2%/15, net 45, and is for the acquisition of property, plant and equipment on account is not a cash outflow item itself as on date since it is still unpaid. Since the purchase is on credit basis, there is no immediate cash flow; here the timing comes into question and has a bearing on the reflection in the cash flow statement. Cash flow statement does not follow accrual basis of accounting but follows only the cash basis of accounting. Only when the cash outflow actually takes place that the treatment in the cash flow statement takes place. In view of this, Alternative No.2 indicating that there can be no reflection of cash flow in the cash flow statement, applies and holds good. (As per ASC 230 of US GAAP, FASB revised Statement No.95, & Codification 230-10 of FASB)
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#explain the accounting cyclequestion..
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What are the positive and negative critiques of investment property
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