LOS B requires us to:
describe how non-cash investing and financing activities are reported.
These transactions are not reported in the cash flow statements, as there is no cash flow involved with them.
Some of the examples of non-cash investing and financing activities are:
a. the barter transaction (one may purchase factory premises in exchange for equity shares of the company),
b. conversion of convertible debentures or bonds into equity shares,
c. the issue of bonus shares, etc.
All these transactions are either investing or financing activities, but there is no cash involved in such transactions. Like, the purchase of factory premises is an investing activity whereas the issue of equity shares is a financing activity, and there is no cash involved in this transaction. Similarly, the conversion of bonds or debentures into equity or issue of bonus shares is also a financing activity; but there is no cash involved in these transactions. Therefore, such transactions should not be reported in the cash flow statement.
However, the non-cash transactions should be reported in the supplemental schedule to the cash flow statement, so that analysts can incorporate the effects of the same in their analysis.