Comparing FASB’s and IASB’s Approach for Statement of Cash Flows Over the years, the FASB’s and the IASB’s efforts to converge accounting standards have been a major development in the area of accounting. The convergence of accounting standards between the two accounting organizations has been successful in some areas while the convergence in other areas emphasizes the differences between the two financial reporting standards. U.S. GAAP (ASC 230) and IFRS (IAS 7) are the standards for presenting the Statement of Cash flows under FASB and IASB respectively. Although there are similarities between the two standards, there are also differences, both of which will be discussed here. The notable convergences between the two standards are: the classification of all business activities as operating, financing, or investing, and the presentation of the cash flow statement using the direct or indirect method. Furthermore, both standards require reconciliation of profit or loss to net cash flows from operating activities, but IAS 7 allows the measure of profit or loss used to vary while ASC 230 makes net income the starting point of all reconciliations. Short-term investments are classified as “Cash and cash equivalents” under both standards, however IAS 7 includes bank overdrafts in addition to short-term investments, while ASC 230 does not. ASC 230 considers bank overdrafts short-term financing, and therefore classifies it as a financing activity. The principle-based IAS 7 allows an entity to determine the classification of interest and dividends paid between operating and financing activities, or classification of interest and dividends received between operating and investing activities. Conversely, an entity is required to classify interest received and paid, and dividends received as operating activities under the rule-based ASC 230. Dividends paid are classified as