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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Doric (pilot) – Free cash flow
Hi John,
Regarding Free Cash Flow formula in the lecture note, I wonder if the Depreciation is the tax-allowable depreciation or the accounting depreciation?
In the Doric question, there was no indication of the depreciation being the tax or the accounting one but the answer still used it to calculate the tax. Just want to check my understanding on FCF regarding this depreciation.
Thank you
Firstly, no depreciation (whether accounting or tax depreciation) is relevant for the free cash flow, because it is not a cash flow.
It is relevant for the calculation of the tax, and the next to the last paragraph of the Doric question does say that there is tax allowable depreciation of 15%.