s at the end. As in GAAP, the statement of cash flows is a required statement for IFRS. In addition, the content and presentation of an IFRS statement of cash flows is similar to the one used for GAAP. However, the disclosure requirements related to the statement of cash flows are more extensive under GAAP. IAS 7 ("Cash Flow Statements") provides the overall IFRS requirements for cash flow information. Key Points Following are the key similarities and differences between GAAP and IFRS as related to the statement of cash flows. Similarities Companies preparing financial statements under IFRS must also prepare a statement of cash flows as an integral part of the financial statements. . Both IFRS and GAAP require that the statement of cash flows should have three major sections-operating, investing, and financing activities-along with changes in cash and cash equivalents. Similar to GAAP, the statement of cash flows can be prepared using either the indirect or direct method under IFRS. In both U.S. and international settings, companies choose for the most part to use the indirect method for reporting net cash flows from operating activities. The definition of cash equivalents used in IFRS is similar to that used in GAAP. A major difference is that in certain situations, bank overdrafts are considered part of cash and cash equivalents under IFRS (which is not the case in GAAP). Under GAAP, bank overdrafts are classified as financing activities in the statement of cash flows and are reported as liabilities on the balance sheet. Differences IFRS requires that noncash investing and financing activities be excluded from the statement of cash flows. Instead, these noncash activities should be reported elsewhere. This requirement is interpreted to mean that noncash investing and financing activities should be disclosed in the notes to the financial statements instead of in the financial statements. Under GAAP, companies may present this information on the face of the statement of cash flows. One area where there can be substantial differences between IFRS and GAAP relates to the classification of interest, dividends, and taxes. The following table indicates the differences between the two approaches. Item GAAP Operating IFRS Interest paid Interest received Dividends paid Dividends received Operating or investing Operating or financing Operating or investing Operating Operating or financing Financing Operating Operating-unless specific Taxes paid identification with financing Operating or investing activity Under IFRS, some companies present the operating section in a single line item, with a full reconciliation provided in the notes to the financial statements. This presentation is not seen under GAAP. Looking to the Future Presently, the FASB and the IASB are involved in a joint project on the presentation and organization of information in the financial statements. One interesting approach, revealed in a published proposal from that project, is that in the future the income statement and balance sheet would adopt headings similar to those of the statement of cash flows. That is, the income statement and balance sheet would be broken into operating, investing, and financing sections. IFRS Exercises IFRS12.1 Discuss the differences that exist in the treatment of bank overdrafts under GAAP and IFRS. IFRS12.2 Describe the treatment of each of the following items under IFRS versus GAAP. a. Interest paid b. Interest received Dividends paid. Dividends received