Profit on disposal in Statement of Cash Flow

Because “profit” is not a cash flow

The amount of the profit on the disposal of an asset will be shown in the statement of profit or loss as an increase in the year’s results ie it will have been credited in the statement of profit and loss and thus the profit for the year will be increased

But “profit” is not a cash flow so we need to deduct the disposal profit amount from the start figure in the statement of cash flows (profit before interest and tax)

It’s not really an outflow of cash – it looks like it is but it’s merely an adjustment

The cash element of an asset disposal is then shown as an inflow withing Investing Activities and, if you think about it, that cash inflow represents cash received in respect of the carrying value of the disposed asset PLUS the profit on the disposal

So that profit is deducted in arriving at the cash flow from Operating Activities and then shown as an income within Investing Activities

OK?