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Chapter 7 — Common Issues Related to Cash Flows

7.5 Business Combinations

7.5 Business Combinations

Cash flows related to the purchases and sales of businesses, PP&E, and other productive assets are presented as investing activities in the statement of cash flows. In a business combination, all cash paid to purchase the business is presented as a single line item in the statement of cash flows, net of any cash and cash equivalents acquired (including acquired restricted cash and restricted cash equivalents after the adoption of ASU 2016-18). That is, changes in the individual assets acquired and liabilities assumed that occur on the acquisition date are no longer reflected as separate line items in the statement of cash flows. After an acquisition, the cash flows of the acquirer and acquiree are combined and presented in a consolidated statement of cash flows.