Cash Flow Statement
Related terms
Category
General Concepts
The cash flow statement reports cash inflows and outflows from operating, investing, and financing activities. Under ASC 842, operating lease payments are classified as operating activities, while finance lease principal payments are financing activities and interest payments are operating activities.
Why it matters
Cash flow classification differs between operating and finance leases. For operating leases, the entire cash payment is an operating activity. For finance leases, the payment is split. interest is operating, principal is financing. This affects key metrics like free cash flow and operating cash flow that investors and analysts use to evaluate companies.
How Arvexi handles this
Arvexi generates the correct cash flow statement classification for each lease payment, separating finance lease payments into operating (interest) and financing (principal) components. Cash flow disclosures are produced alongside income statement and balance sheet outputs.