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Article: Income taxes in the cash flow statement
- Article from:
- The CPA Journal
- Article date:
- June 1, 2003
- Author:
CopyrightCopyright New York State Society of Certified Public Accountants Jun 2003. Provided by ProQuest LLC. (Hide copyright information)
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In Brief
A Proposal for More Precise Presentation
SFAS 95, Statement of Cash Flows, classifies income tax payments as operating outflows in the cash flow statement, even though some income tax payments relate to gains and losses on investing and financing activities, such as gains and losses on plant asset disposals and early debt extinguishments. As a result, net cash flow from operating activities (NCFO) is contaminated by the income tax effects of investing and financing activities. To avoid such contamination, the author argues for amending SFAS 95 to require income tax allocation in the cash flow statement. By allocating income taxes in the cash flow statement, the income tax effects ...