Which of the following statements about shares issued in exchange for assets is true?

Question

BlackTom AI · Accepted Answer

The question asks about treatment of shares issued in exchange for assets in financial reporting.
Option 1: 'They impact cash flows.' Shares issued for assets do not involve cash at the time of the transaction, so they generally do not affect cash flows. Therefore this statement is incorrect.
Option 2: 'They are classified as operating activities.' Noncash transactions are not classified as operating, investing, or financing activities in the cash flow statement because they do not involve cash flows themselves. This makes the option incorrect.
Option 3: 'They are classified as investment activities.' While the exchange involves assets, the noncash nature of this transaction means it is not shown as a cash outflow for investing activities. It is still a noncash financing/investing disclosure rather than a standard cash flow classification, so this is not accurate.
Option 4: 'They are disclosed in a note to the statement of cash flows.' This statement aligns with how noncash investing and financing activities are presented: they are disclosed and explained, often in a note or supplementary schedule, rather than being included as line items in the main cash flow categories. Thus, this option correctly reflects the treatment of shares issued for assets.

In summary, the correct understanding is that noncash transactions like issuing shares for assets are disclosed to inform users, typically in a note to the cash flow statement, rather than altering cash flow classifications. The other statements misstate the impact or classification of noncash transactions.

COMM_V 320 DD4 2025W1 Part A Final Exam December 15, 2025 Part A Multiple Choice - 30 minutes

Which of the following statements about shares issued in exchange for assets is true?

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