Common cash flow classification errors in practice

Although the definitions of operating activities, financing activities and investing activities may appear straightforward, in practice a number of classification errors are frequently made. These include:

1. Cash outflows related to the acquisition of intangible assets and items of property, plant and equipment incorrectly included within operating activities.

Some items of property, plant and equipment are purchased from suppliers on standard credit terms that are similar to those for inventory and for amounts payable to other creditors.