In LOS 44.n in Schweser, or LOS 44.3.4.1 in CFAI, there is a description of adjusted CFO. Also see question #20 on page 263 of Schweser book 3.
I am confused as to when interest is added back to get adjusted CFO, and its treatment as an operating or financing cash flow under GAAP and IFRS.
Can anyone explain when interest adjusted for taxes should be added back, and when it should not be added back to get adjusted CFO?作者: random_walker47 时间: 2011-7-11 19:14
wait...i think i am wrong
Edited 3 time(s). Last edit at Sunday, February 6, 2011 at 08:16PM by passme.作者: genuinecfa 时间: 2011-7-11 19:14
It is a tricky question, and doesn't tie back to either the Schweser materials or CFAI materials very well.
I'm just going to learn that under IFRS you typically want to add interest back to CFO to get adjusted CFO, and under GAAP, you don't add it back because it has to be counted as an operating cash flow.
It seems contradictory though to the LOSs going over how to get to FCFF...作者: SeanWest 时间: 2011-7-11 19:14
was there a question related to adjusted CFO in the official text?
Also, this might be a noob question, but can someone explain to me why the interest expense shows up as something you add back? would interest actually paid in cash show up as a negative on the CF statement?
example of a GAAP CF statement:
NI
+ depreciation expense
- increase in A/R
+ increase in A/P
+ interest expense
- interest paid
+ taxes
- taxes paid
= CFO
example of an IFRS CF statement:
NI
+ depreciation expense
- increase in A/R
+ increase in A/P
+ taxes
- taxes paid
= CFO
is this right? is this how it works? If not what am I missing please?作者: tikfed 时间: 2011-7-11 19:14
391 is just about calculating FCFF using NI as a base; I have that down pat, that's bread and butter stuff.
this adjusted CFO thing, and reconciling GAAP with IFRS on the balance sheet is what's tripping me up.作者: wxs1986 时间: 2011-7-11 19:14
I don't have my books in front of me but i think you guys are making this more complicated than it is.
CFO for IFRS does not always include after tax interest expense.
Therefore if you are an analyst comparing a company reporting with GAAP and a company reporting with IFRS, you will adjust the CFO of the IFRS company by adding back after tax interest expense.作者: Kapie 时间: 2011-7-11 19:14
verse214 Wrote:
-------------------------------------------------------
> I don't have my books in front of me but i think
> you guys are making this more complicated than it
> is.
>
> CFO for IFRS does not always include after tax
> interest expense.
>
> Therefore if you are an analyst comparing a
> company reporting with GAAP and a company
> reporting with IFRS, you will adjust the CFO of
> the IFRS company by adding back after tax interest
> expense.
