INSTRUCTIONS: Each discussion question should be at least one page and double spaced.
DISCUSSION 1: “Operating Activities” Please respond to the following:
- From the e-Activity, evaluate the logic of reflecting key person life insurance in the operating activities of the cash flow statement and determine if this presentation is misleading to users of the financial statements.
- Currently, Financial Accounting Standards Board (FASB) has not provided guidance on the appropriate section for reflecting key person life insurance. As a member of FASB, determine the guidance you would provide for key person insurance in the cash flow statement. Provide your rationale.
- Go to Chief Financial Officer Magazine s Website to read the article titled Key-Person Insurance: a Cash-Flow Puzzle, dated April 4, 2012, located at http://www3.cfo.com/article/2012/4/cash-flow_free-cash-flow-mulford-georgia-tech-key-person-life-insurance-premium-classification?currpage=2. Be prepared to discuss.
DISCUSSION 2: “Free Cash Flow” Please respond to the following:
- Analyze the impact of erroneous classifications in the operating activities section of the cash flow statement on free cash flow and how this distortion can impact the decisions made by financial statement users.
- Assess the importance of free cash flow in a growth company. Provide a brief scenario of a specific type of business that would benefit from free cash flow.