Where will you show the purchase of Goodwill in a Cash Flow Statement?
Cash flow from investing activities shows the purchase of Goodwill in a Cash Flow Statement.
Cash flows from investing activities are the cash flows from the transactions involving the purchase and sale of non-current assets, 1.e., fixed assets (both tangible and intangible assets) and long-term investment, i.e., long-term productive assets intended to generate future income and cash flows.
Following are the examples of Cash Flows from Investing Activities
(i) Cash payments to acquire fixed assets including intangible assets such as goodwill, patents, and copyrights. It also includes payments made to construct fixed assets.
(ii) Cash receipts from the sale (disposal) of fixed assets including intangibles.
(iii) Payment to acquire shares or debentures, investments.
(iv) Cash receipts from the sale of shares, debentures, etc. of other companies.
(v) Cash advances and loans made to third parties (other than loans and advances made by a financial enterprise).
(vi) Cash receipts from the repayment of loans and advances made to third parties.
(vii) Cash payments for future contracts, optional contracts, etc., when the payments are classified as financing activities.