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Strategies & Market Trends : Maximum Investing
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To: Howard Bennett who wrote (43)11/14/2002 5:46:40 AM
From: Robert Scott   of 81
 
Differences in treatment arise when the tax code gives a different expensing period or rate to certain assets versus GAAP treatment. Accelerated depreciation is a great example.

I believe pro forma adjustments have to do with one-time type events not differences in tax versus GAAP treatment of assets. Those differences should be reflected in the computation of the tax liability.

As far as cash flow, certain items are properly added back like amortization and depreciation which affect the net income on the income statement because they are proper deductions but do not consume cash. A cash flow statement starts with net income so depreciation, etc must be added back.

I'm sure there are exceptions to what I've said as I am not an accountant either but in general, the above is the way it works.
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