DTAs/DTLs - Part of NWC or not??
Are DTAs/DTLs part of net working capital on the cash flow statement? Wanted to see what the convention is. I asked someone at my bank and he said it's part of NWC but he didn't seem sure
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Based on the most helpful WSO content, Deferred Tax Assets (DTAs) and Deferred Tax Liabilities (DTLs) are not typically considered part of Net Working Capital (NWC) on the cash flow statement.
Net Working Capital is generally calculated as:
$$\text{NWC} = \text{Current Assets (excluding cash)} - \text{Current Liabilities (excluding debt)}$$
DTAs and DTLs are not included in this calculation because they are not directly tied to the company's operational cash flow or short-term working capital needs. Instead, they are more related to tax timing differences and are typically classified as non-current assets or liabilities on the balance sheet.
If you're modeling or analyzing, it's best to exclude DTAs and DTLs from NWC unless there's a specific reason or company-specific convention to include them.
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