Hi all, been confused about this the last few days and hoping to get some help.
Looking at calculating basic FCF (i.e. CFO - CapEx). My understanding is that to calculate FCF, we want to ensure our CFO captured the full lease expense (split between interest/depreciation now).
What I have read is that under IFRS, you should not add back the full D&A balance item that you find on the CFS when calculating CFO, but only the proportion that's not related to the leases. I don't understand and would appreciate insight on:
1 - Why is this the case under IFRS accounting, i.e. why do we not add back the depreciation attributable to the lease?
2 - Under U.S. GAAP, do we add back the depreciation expense? How is the treatment different here than IFRS?
3 - Does the answer change when looking at operating vs finance leases?
Would appreciate any insight.
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