Key Rule #6 Flashcards
1
Q
When does a PPE sale affect the IS?
A
When it is sold at a gain/ loss?
2
Q
When does a PPE sale not affect the IS?
A
When it was sold at the price it was bought
3
Q
Why do we -/+ the gain/loss in the CFO portion of the CFS?
A
Haven’t lost or gained anything in the current period, so need to +/- it back to show it hasn’t used up cash.
Shows that you spent less/ more than the amount you sold it for
Also reclassify it from operations to investment.
4
Q
What is not cash-tax deductible?
A
Impairments, writedowns
5
Q
Why are impairments and writedowns not cash-tax deductible?
A
These are not regular predictable events.
6
Q
Why do we write down things?
A
Value declined substantially so that current book value is inaccurate.
