The economics of cash are universal. The filing cabinet differs. Interest, dividends and taxes are the battleground, and the differences are big enough to change your conclusions if you compare raw CFO across borders.
6.1 The trap table (learn this cold)
For a non-financial company:
| Item | US GAAP (ASC 230) | IFRS (IAS 7, today) | Ind AS 7 |
|---|---|---|---|
| Interest paid | CFO (mandatory) | CFO or CFF (choice, applied consistently) | CFF (mandatory) |
| Interest received | CFO (mandatory) | CFO or CFI (choice) | CFI (mandatory) |
| Dividends received | CFO (mandatory) | CFO or CFI (choice) | CFI (mandatory) |
| Dividends paid | CFF (mandatory) | CFF or CFO (choice) | CFF (mandatory) |
| Income taxes | CFO (all of it) | CFO, unless specifically identifiable with an investing/financing transaction | Same as IFRS |
For a financial institution (bank/NBFC), Ind AS 7 flips the first three. Interest paid, interest received and dividends received are all CFO, because for a lender, interest is the operating revenue cycle. Dividends paid stay CFF for everyone.
Notice the pattern. IFRS offers options. Ind AS deliberately removed them and mandated one treatment per item, an India–IFRS divergence from the same family you met building the balance sheet. US GAAP mandates too, but it picks different answers. So three CFOs, each prepared in good faith for identical economics, can differ materially.
Forward flag (as of mid-2026; check before relying): IFRS 18, effective for periods beginning on or after 1 January 2027, amends IAS 7 to remove most of these options for non-financial companies. Interest paid moves to financing. Interest and dividends received move to investing. That converges IFRS toward the Ind AS answers, with the indirect reconciliation starting from operating profit. India's mirroring amendment hadn't been notified when this was written, so check the ICAI/MCA position when you get here.
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6.2 Why it matters: same company, three CFOs
Here's a synthetic illustration. A company's operations generate 200 of cash before interest and taxes. It pays interest of 30 and taxes of 40. It receives interest of 10 and dividends of 5 on its treasury investments. And it pays dividends of 25 to its owners.
| US GAAP | IFRS (max-CFO choices) | Ind AS | |
|---|---|---|---|
| Operating core | 200 | 200 | 200 |
| Interest paid | (30) | → CFF | → CFF |
| Interest received | 10 | 10 | → CFI |
| Dividends received | 5 | 5 | → CFI |
| Taxes paid | (40) | (40) | (40) |
| Reported CFO | 145 | 175 | 160 |
It's the identical business, yet reported CFO spans 145 to 175, a 21% spread, before anyone has done anything aggressive. Two consequences follow:
- Never compare raw CFO (or CFO-based ratios, or FCF) across standards without reclassifying. The Phase 1 fix is to restate to one convention. To make an Ind AS company US-comparable, subtract interest paid from its CFO. A thorough restatement also pulls interest and dividends received back in from CFI. Reverse all that for the other direction. Phase 3 hands you the cleaner instrument, FCFF, defined before financing flows entirely.
- A leveraged Ind AS company's CFO flatters it. Interest, often its biggest real outflow, is reported in CFF. An Indian infrastructure borrower can show a strong CFO while interest devours everything. The US presentation would show the strain inside CFO itself. Whenever you read an Ind AS or IFRS statement, find where interest paid lives before you admire CFO.
6.3 Other cross-standard wrinkles worth carrying
- Leases (previewing the liabilities and financing module ahead): under IFRS 16/Ind AS 116, lease principal is CFF. Only variable or short-term lease payments stay in CFO. Capitalizing leases raised reported CFO. Under US GAAP (ASC 842), operating-lease payments remain fully in CFO, and only finance-lease principal goes to CFF. Same store, same rent cheque, yet the IFRS/Ind AS retailer reports higher CFO. This pairs with the EBITDA trap that module teaches.
- Bank overdrafts: under IFRS/Ind AS, overdrafts repayable on demand that are integral to cash management count as negative cash, a component of C&CE. Under US GAAP they're liabilities, and changes in them are financing flows.
- Restricted cash: US GAAP explains the change in cash including restricted cash, with a reconciliation of totals. Under Ind AS, restricted balances such as unpaid-dividend accounts and margin money usually go in "other bank balances," outside C&CE.
- Presentation habit: US statements begin CFO at net income. Indian statements begin at profit before tax, then add back finance costs, back out investment income, adjust working capital and deduct income taxes paid as an explicit line. Both are indirect. Only the starting rung differs. Section 8–9 walk one of each.