Level 2: 2 Doubts on Long-lived assets-depreciation & impairment effect capital, statements, affect, operation, therefore

lawkm223

1. From Schweser Notes 2014 L2 Book 2, P.35 "Cashflow from operation" the last sentences,
What is meant by "Depreciation is noncash expense, aside from any taxes, therefore does not affect CFO"?
From my understanding, CFO=EBIT+ NCC- chg of working capital, how does one explain "depreciation does not affect CFO"?

2. On P.48 "Impact of impairment on financial statements & Ratio",
What is meant by "impairment loss hv no impact on CF & tax saving"?
I only know impairment loss is recorded in I/S & nothing else

mophic

1  fomula's right, but depreciation have effect on both ebit & ncc(dep is above ebit line),so cfo itself will remain the same

2 cash tax differs from the reported tax expense for they use different tax base, and the impairments are not recognized in tax return till the asset's sold or disposed, so they don't affect any cash flow