Impairment affect, charge, through

PieMan

My brain is fried at this point. I know Impairment is a non cash charge but why wouldn't it affect CFO through the fact that less taxes are paid?

kingstongal

Aren't fewer taxes paid. Taxes are based off of tax depreciation and cash inflow/outflows.

ayodayo

Impairments are not deductible for tax purposes until the asset is disposed of. So the impairment gives rise to a deferred tax asset. That is why there is no CFO effect.

onelife1

+1 Thanks Thecodont.... didn't know that.

Swanand

Thecodont Wrote:
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> Impairments are not deductible for tax purposes
> until the asset is disposed of. So the impairment
> gives rise to a deferred tax asset. That is why
> there is no CFO effect.


Interesting! But I need some clarification. Deferred tax asset means you paid taxes more than what was due per I/S, and so you get some tax credit (deferred tax asset). Under impairment, pretax income is lower, meaning tax expense per I/S is lower than without impairment. So how can taxable income per tax code be higher, and in either case, cash would have been paid, thus affecting CFO. The good thing is DTA and DTL are not on the exam this year.