Practicing Success
Why are the assets acquired by issuing shares not disclosed in the cash flow statement of a company? |
They are considered extraordinary items They are non-cash transactions They are non-recurring events They are investing activities |
They are non-cash transactions |
Assets acquired by issuing shares are not disclosed in the cash flow statement because they involve a non-cash transaction. In other words, no actual cash or cash equivalents are exchanged during this process. Instead of using cash to acquire the assets, the company issues shares of its ownership to the investors or shareholders in exchange for the assets. The cash flow statement's primary purpose is to provide insight into the sources and uses of cash and cash equivalents during a specific period. Since assets acquired by issuing shares do not involve the movement of cash, they are excluded from the cash flow statement. However, this transaction is usually disclosed elsewhere in the financial statements to ensure transparency and provide a comprehensive view of the company's financial activities. |