[mogritz]

How does the amortization of trademarks affect the statement of cash flows? Using the indirect method.

[SBU]

This was already answered in a previous post but I didn't want to take the time to find it. Short answer, if indirect method is used, you just add back amortization costs for the year. It is treated just like depreciation, while it lowers your net income, it doesn't lower your cashflow for the period. It also doesn't matter what type of intangible is being amortized. They all work the same way on the cashflow statement.

[Jindani]

I was trying to understand the answer from SBU.

Amortization of trade mark will increase in cash flows from operating investment

[morgaine300]

Jindani, SBU's answer was correct. Amortization doesn't do anything to cash flow because it's just recognizing the amortization expense on the books, but there is no cash inflow or outflow for it. So it's incorrect that it would 'increase cash flows.'

The indirect method is not saying whether something is a cash inflow or outflow. (That's the direct method.) Net income does not equate to actual cash flows from operating, so a series of adjustments is made. Adding the amortization amount as SBU said is not saying it's an increase in cash flow - it's just adding it to the net income amount as an adjustment. Those are two different things.