How is cash paid to Non-Controlling Interests (NCI) recognized in the cash flow statement?

The cash paid to Non-Controlling Interests (NCI) is recognized in the cash flow statement as a cash outflow under cash flows from financing activities because it relates to transactions that impact the equity structure of the company. When a company makes a payment to NCIs—who are shareholders but do not have control of the entity—this payment represents a distribution of equity rather than an operational or investment activity.

Financing activities encompass transactions that affect equity and borrowing, including the issuance or repurchase of equity, dividends paid, and distributions to shareholders (which include NCIs). Thus, classifying cash payments to NCIs as financing activities accurately reflects the nature of these transactions in the context of the company's financing structure and capital management.

In contrast, cash flows from operating activities typically relate to the core business operations of generating revenue and managing expenses, while investing activities involve the acquisition and disposal of long-term assets. Payments to NCIs do not fit within these categories, which is why recognizing them as cash outflows under financing activities is the appropriate treatment.