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  • Essay / Direct Approach and Indirect Approach - 708

    Among other things, when the FASB created the statement of cash flows as an essential element, it allowed the direct or indirect approach/method. However, if direct approaches are adopted, the FASB requires that they be aided by a schedule of adjustments that constitute the profits to be earned provided they are used by operational activities. This particular schedule can be presented either in the footnotes of the financial statement or on the cover of the financial statement. Furthermore, commonly accepted accounting principle requires that, regardless of the approach or method, the cash figures paid for items such as taxes and interest must be known.