FIN.4:4.4 - Move between earnings and cash without counting an effect twice

Start the bridge from a clearly defined profit measure. For an operating cash view, remove financing effects when they are already being treated separately, add back the noncash expenses actually included, and account for the changes in operating balances that connect recognition to settlement. Deduct capital cash expenditure where the receiving measure includes investment. Tax expense, tax payable and cash tax can differ; use the applicable schedule when timing or loss utilization matters.

If starting from a direct schedule of customer receipts, supplier payments and other cash movements, do not also subtract the receivable or payable change as though those flows were still accrual quantities. The indirect bridge and the direct schedule are two routes to a matching cash result, not two sets of deductions to combine. FIN.6 gives the project-specific after-tax bridge and incremental comparison; preparing the company’s account alone does not establish a project’s opportunity costs.

Define operating working capital by the balances used in the receiving calculation. Do not include debt in a working-capital adjustment and then subtract its repayment again. Cash needed to operate is not automatically excess cash available to an acquirer. FIN.7 explains how the valued operating activity and the enterprise-to-equity bridge treat those amounts.

Match nominal and real amounts and separate currency translation from actual conversion. A receivable may change its reported carrying amount because of an exchange-rate movement without being collected. Its future cash and any hedging payment belong to the relevant dated scenarios; FIN.13–14 develop that exposure and action. Obtain the required accounting or tax interpretation where the policy itself is unresolved.