Cash flow - direct method or indirect method?

Question

How do you decide which method is to be used? What does IFRS/IAS recommend? Which method is easier to prepare?

Answer 1

Cash flows from operating activities can be prepared on direct or indirect method. IAS 7 encourages the direct method although the indirect method is also acceptable. For me indirect method is easier to prepare. Deciding which method to use will depend on your taste. If you like to see the C/F starts from profit before tax then indirect method is the way.

Answer 2

I prefer indirect method. It is easy to prepare & easy to understand the gap between the profit & cash balances.