Define and explain significant noncash investing and financing activities and the method of reporting them on the statement of cash flows. Solution Investing and Financing activities are reported under respective heads in cashflow statement onlyn it results inflow or outflow of cash. Noncash investing and financing activities are not a part of cash flow statement since it doesnut have any significance in a statement prepared to reflect the movement of cash in reporting period. For better understanding for readers of financial satements we disclose this information as a Note or Schedule to cash flow statement. The significant noncash investing and financing activities are 1. Purchase of Assets other than Cash ex. Company acquired assets (Investing Activity) by arranging loan , issuing securities, or any alternative way of financing ( all are financing activity} 2. Acqusition of interest in Subsidiary, associates etc by issuing security It is also an ivesting activity but doesnot result cash outflow since we are issuing shares/ debentures of the company in consideration. Issue of security is a financing activity 3. Sale/ Disposal of Assets not for cash Sale of Assets definitl;y a investing activity since the consideration is not received/ receivable in cash it result a non cash activity. Consideration may be acquring another assets, Acquiring intersest in other business, settling of debt etc, 4. Financial arrangements Acquring finance by way of issuing security or external financial sources for repaying another debt, redumption of debentures etc is also an example of noncash financing activity.

1. Define and explain significant noncash investing and financing activities and the method of
reporting them on the statement of cash flows.
Solution
Investing and Financing activities are reported under respective heads in cashflow statement
onlyn it results inflow or outflow of cash.
Noncash investing and financing activities are not a part of cash flow statement since it doesnut
have any significance in a statement prepared to reflect the movement of cash in reporting
period.
For better understanding for readers of financial satements we disclose this information as a Note
or Schedule to cash flow statement.
The significant noncash investing and financing activities are
1. Purchase of Assets other than Cash
ex. Company acquired assets (Investing Activity) by arranging loan , issuing securities, or any
alternative way of financing ( all are financing activity}
2. Acqusition of interest in Subsidiary, associates etc by issuing security
It is also an ivesting activity but doesnot result cash outflow since we are issuing shares/
debentures of the company in consideration. Issue of security is a financing activity
3. Sale/ Disposal of Assets not for cash
Sale of Assets definitl;y a investing activity since the consideration is not received/ receivable in
cash it result a non cash activity. Consideration may be acquring another assets, Acquiring
intersest in other business, settling of debt etc,
4. Financial arrangements
Acquring finance by way of issuing security or external financial sources for repaying another
debt, redumption of debentures etc is also an example of noncash financing activity