How should net cash effects from the purchase/sale transaction of a subsidiary be presented?

The purchase or sale of a subsidiary represents a significant investment decision and is directly related to the long-term operations and investments of a company. Therefore, the net cash effects from these transactions are presented separately under 'cash flows from investing activities' in the cash flow statement.

This separate categorization aligns with the standard accounting practices and financial reporting frameworks, such as IFRS and GAAP, which require that cash flows from investing activities include transactions involving the acquisition and disposal of subsidiaries, investments, property, plant and equipment, and other long-term assets. By isolating these cash flows, users of the financial statements can gain clearer insights into the company's investment strategies and financial health without them being obscured by everyday operational cash flows.

Presenting these transactions separately helps stakeholders evaluate the capital management strategy of the business and assess how much cash is being utilized for future growth or how much cash is being generated from divestitures, contributing to more informed decision-making.