What will be the effect of depreciation written back on cash flow statement. Will it be subtracted from net profit before interest and tax under extraordinary items or added to non operating income then subtracted...
Dear Student
Depreciation is charged on assets to reduce the value in the normal course of business. Depreciation Written back means the value of the asset is increased by adding the amount given, it may be due to any reason or circumstances.
In cash flow, we know depreciation is a non-cash expense, therefore we used to add it to Net profit before Tax.
Now when it is written back, it shall be deducted from Net profit before Tax (Assuming written back depreciation amount is already included in Net profit before Tax) because it is a non-cash item and is increasing the profits.
Hope this helps
Regards
Depreciation is charged on assets to reduce the value in the normal course of business. Depreciation Written back means the value of the asset is increased by adding the amount given, it may be due to any reason or circumstances.
In cash flow, we know depreciation is a non-cash expense, therefore we used to add it to Net profit before Tax.
Now when it is written back, it shall be deducted from Net profit before Tax (Assuming written back depreciation amount is already included in Net profit before Tax) because it is a non-cash item and is increasing the profits.
Hope this helps
Regards