Operating cash flows?

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steve11

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Under International Financial Reporting Standards (IFRS), reported operating cash flows are most
likely to be increased by the classification choice made for:

A) Dividends paid
B) Interest expense
C) Impairement losses on fixed assets

The correct answer is B. Can anyone explain why. Thanks!
 
Under IFRS Interest Expense can be classified CFO (cash flow from operatings) or CFF (cash flow from financing), there is no bigger/deeper insight. I don’t see any alternative than learning those by heart.
Remember also, that under US GAAP interest expense is always CFO.
 
Similarly, using the same arguement, even dividends paid (in IFRS) can be classified as operating or financing cash flows. So, why is it the wrong answer?
 
That is a good point, I do not see why A) would not be correct.
Apart from that, both A) and B) would actually decrease the CFO, since they are cash outflows.
Where is the question from, maybe they made a mistake.
 
I don’t think answer A would be correct. We can reject C, and then only B is correct.
CFO under IFRS will be increased by interest expense - this is not interest paid (no cash outflow). This item can be found on Income Statement. This is adjustment in C/F prepared under indirect method.
Unfortunately, you have to be carefull with interest expense term, because sometimes can be interest paid (when calculating FCFF, so cash outflow), and sometimes interset incurred that maybe also adjusted by gain on amortisation discount and/or loss on amortisation premium.
EDIT: on various IFRS C/F statements of companies, it is not uncommon to see under CFO (indirect method) interest expense next to interest paid.
 
Ah of course, thanks for pointing this out!
Under the direct method we deduct interest paid. Under the indirect we have to add it back to Net Income, since it is no cash as you said.
 
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