Income from equity method investments must be added to net income to determine cash flows from operations under the indirect method.

Question

Quizplus · Accepted Answer

Income from equity method investments is not added to net income when calculating cash flows from operations under the indirect method because it is a non-cash item. Instead, it is subtracted from net income to adjust for the portion of income that does not involve cash transactions.

Income from Equity Method Investments Must Be Added to Net