Hi
Looking at some cash flow statements on ft.com, like BP's
Fiscal data as of Dec 31 2015 | 2015 | 2014 | 2013 |
OPERATIONS | |||
Net income | (9,571) | 4,950 | 30,221 |
Depreciation/depletion | 15,219 | 15,163 | 2,710 |
Non-Cash items | 13,882 | 9,134 | 359 |
Cash taxes paid, supplemental | 2,256 | 4,787 | 6,307 |
Cash interest paid, supplemental | 1,080 | 937 | 1,084 |
Changes in working capital | (397) | 3,507 | (12,190) |
Total cash from operations | 19,133 | 32,754 | 21,100 |
Does anyone know why depreciation/depletion is added to cash flow? Usually, (asset) depreciation doesn't affect cash flow - right? It should be an expense, isn't it?
Any thought appreciated.
Thanks
Replies (3)
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Because of where it starts from?
The starting figure is presumably net profits from P&L, which is after depreciation has been charged. Hence, to get towards cash generation, you need to add depreciation back.
The above is obviously right. To put it another way, the example you show doesn't add it to cash flow at all, despite what you say in your heading. It rightly adds it to profit to arrive at cash flow.
Clue in the Question
The clue's in your question "usualy depreciation doesn't affect cash flow".
No it doesn't - but it's been deducted on the way to net profit so it needs adding back.