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    Question

    Which of the following will not affect cash flows under

    indirect method when reconciling profit to net cash from operating activities?
    A Depreciation (non-cash) Correct Answer Incorrect Answer
    B Increase in trade receivables (adjustment for working capital) Correct Answer Incorrect Answer
    C Loss on sale of fixed assets (add back) Correct Answer Incorrect Answer
    D Revaluation surplus (OCI item) --- typically non-cash and no effect on operating cash flows unless realised Correct Answer Incorrect Answer

    Solution

    A revaluation surplus is a non-cash item recognized directly in equity (through OCI) and does not involve cash flows. It is not added back in the operating cash flow reconciliation under the indirect method.

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