Accounting Question – Impairment of Accounts Receivables
Hi, I am confused regarding how impairment of AR would affect the cash flow statement specifically.
Assuming an impairment of $10, which one of the two steps below is correct for the cash flow statement?
1) Add back impairment expense of $10 as a non-cash expense
2) Since AR drops by $10, changes in net working capital will result in a $10 cash inflow
Both seems correct, but doing both seems like I am double counting. Which one is the correct approach and why is the other method wrong?
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