U.S.GAAP
A)permits firms to report cash flow from operations using the direct or indirect method.
B)prefers the direct method of reporting cash flow from operations over the indirect method.
C)states that the direct method must show a reconciliation between net income and cash flow from operations either at the bottom of the statement of cash flows or in a separate note.
D)includes all of the above.
E)includes none of the above.

Question

Quizplus · Accepted Answer

US GAAP permits firms to report cash flow from operations using either the direct or indirect method. However, it prefers the direct method of reporting as it provides a more detailed breakdown of cash inflows and outflows. Furthermore, US GAAP states that the direct method must show a reconciliation between net income and cash flow from operations either at the bottom of the statement of cash flows or in a separate note. Therefore, all of the given options are correct.