CASE 3 RECASTING FINANCIAL STATEMENTS This case relates to Chapter 4 . C. Ash Flo Investment - background You have just joined a smal boutique inverament firm C. Ash Flo Imestment Limited, in your first job as a new graduate. Ash your boss and founder of the firm, has asked you to standardise the financial statements of Smith City Group Limited. Ths task has gone well so far. You coly have the cash flow statement to complete. You note the operating cash flows have two interest paids, as shown in Figure C3.1; one for finance business and two for bark and other Your first reaction was to aggregate these into one amount. You were just about to do this when you had a second thought - is interest paid an operating expense? Or should it be part of financing cash fows? You ask Ash how you should treat the interest paid. His response is unhelpful. tits your problem. When you have completed the task, write me a brief merno and tell me what you have done and why. We will then develop a policy for future standardisation of the cash flow statement? To inform your opinion, you decide to look at how other frms treat interest paid in the cash flow statement You then have further thoughts: is the treatment of interest paid differently between retail firms and finance firms or banks? You collect the cash flow statements of ANZ Bank (Figure C3.2) and two other retal firms - Kathmandu (Figure C3.3) and Super Retail Group (Figure C3.4). A quick look at other cash flow statements has left you a little confused. Your next thought is perhaps you should look at what the accounting standards require. Source Smiths City Croup. Arrual Report, 2018, p. 41 FIGURE C3.2 Operating cash flow of ANZ Bank, 2018 QUESTIONS 1 Write a merno to Ash on your views of the appropriate treatment of interest paid in the statement of cash flows. 2 Is diversify in accounting a good thing? What are the advantages or disadvantages? Mchael Bradsury preparted this case, Mis case is intended solely as a basis for class discussion and is not lintended to serve as an endorsement, source of primary data or illatration of elfectlve or inetfective manopement. FloURE C3. 4 mentatim nosh finw of Super Retail Group, 2018