It takes the expense out of the income statement

But the cash obligation is still there.

The cash flow statement is actually the one that gives the most useful info as it shows what we’re really paying out and what’s actually coming in.

All that will happen for accounting purposes this year is we will pay Naismith and his wages will be used to reduce the liability on the balance sheet in respect of the onerous contract and won’t go through the income statement. The cash will still leave the door.

Cash flow is what matters when it comes down to it. The income statement doesn’t tell that story. Plenty of profitable business for accounting purposes go down the pan because of cash flow.

Posted By: SimonOTBC, Oct 24, 12:19:07