Cash flow-indirect method

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    tilavina
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    The company successfully completed the development of a new product during the current year, capitalizing a further $500m before amortization changes for the period.

    Will this be treated in the cashflow statement and if so under which of the captions


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    richieinspain
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    Well if the development expenditure is capitalized the only thing that hits the I/S will be the amortization for the year.
    Therefore when doing cash flows (operating activities) you have to add back the amortization charge (for he period it was amortized in the year) to operating profit.

    The costs of developing the new product would decrease cash flow so you need to take account of this in investing activities.

    I hope that this helps. Also please correct me if I am mistaken.

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