Under the indirect method of presenting operating cash flows, which action to alter the cash flow from operations will be most difficult to detect?
- Defer payment of a current liability
- Transact with an unconsolidated special purpose entity
- Change inventory costing from FIFO to weighted average
PLS EXPLAIN THE OPTION- B
Special purpose entity is created to separate assets from the company to enable the entity to raise money easily by keeping the assets as collateral. Refer ABS chapter to get more clarity.
SPE are not consolidated with the entity as the legal obligation of main entity cannot be merged with SPE.
To identify the transaction with external entity is difficult in indirect method as it starts with net profit and make adjustments for non cash gains or expenses.