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Why is the depreciation included in the operating cash flow (OCF) rather than the investing cash flow (ICF) section of a cash flow statement (indirect method)?

I haven't found the source from the standards or interpretations (IAS) as to why we don't add depreciation back to the assets (net) in the ICF.

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    If by IAS you mean the international accounting standards, they have been replaced by the international financial reporting standards (IFRS) a while ago.
    – Alper
    Nov 28 '21 at 18:46
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Depreciation isn't "added" to either section because it's a non-cash expense. What you are seeing is the reversal of depreciation from net income.

Depreciation is an expense, and reduces net income. But, when calculating operating cash flow, it's common to start with net income (which is mostly cash-based operating activities) and back out all non-cash items, like depreciation. So it's "added" to reverse the reduction effect.

The investing cash flow section only includes cash transactions that deal with the acquisition or divestiture of assets. Depreciation is not a cash transaction, so it has no bearing on investing cash flow.

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Depreciation is the estimated wear & tear in a company's tangible assets during a certain period of time. It is also deducted from revenues in calculation of net profit which shows how much value the company has derived in net on an accrual basis during the same period from all activities.

To get how much value the company has derived only through operating activities instead on a cash basis in the same period (which is operating cash flow), non-cash expenses such as depreciation and non-operating expenses and income, respectively, such as interest expenses and income, all of which are included in the income statement, and changes in operations-related balance sheet items such as receivables, inventory and payables are, as per necessary, added to or subtracted from net profit in the calculation via the indirect method.

Investing cash flow measures in general how much the company has spent on acquisition and disposal of long-term assets on a cash basis. Adding depreciation to cash spent and received in acquisition and disposal of long-term assets, respectively, would yield a misleading result.

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