Why ft.com adds depreciation to cash flow?

Why ft.com adds depreciation to cash flow?

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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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By tom123
16th Apr 2016 18:55

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.

Thanks (1)
By johngroganjga
16th Apr 2016 19:16

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.

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RLI
By lionofludesch
17th Apr 2016 16:31

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.

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