medium · Financial Accounting statement-of-cash-flows
Company X, a US parent, has a subsidiary in London. The subsidiary's functional currency is the British Pound (GBP). The subsidiary declares and pays a dividend to the parent.
In the consolidated statement of cash flows, how is the effect of exchange rate changes on the cash balance reported?
- Within the Financing Activities section, as dividends are financing items
- It is not reported on the cash flow statement, as it is a non-cash translation adjustment
- As a separate line item below the three main sections (Operating, Investing, Financing)
- As an adjustment within the Operating Activities section
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