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      Question

      Under AS-3, how should a SEBI-registered Non-Banking

      Financial Company (NBFC) classify Interest Received and Interest Paid in its Cash Flow Statement?
      A Interest Received as Investing; Interest Paid as Financing. Correct Answer Incorrect Answer
      B Both as Operating Activities. Correct Answer Incorrect Answer
      C Both as Financing Activities. Correct Answer Incorrect Answer
      D Interest Received as Operating; Interest Paid as Financing. Correct Answer Incorrect Answer
      E Interest Received as Investing; Interest Paid as Operating. Correct Answer Incorrect Answer

      Solution

      For financial enterprises (like banks or NBFCs), interest and dividends received/paid are considered Operating Activities because they relate to the primary revenue-producing activity (lending and borrowing).   For non-financial firms, interest paid is Financing and interest received is Investing.

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