Change In Other Working Capital
A catch-all line on the cash flow statement that captures the net cash impact of miscellaneous current operating assets and liabilities.
āChange in Other Working Capitalā refers to the net change in miscellaneous current operating assets and liabilities not explicitly broken out elsewhere on the cash flow statement. After accounting for major items like accounts receivable, inventory, and accounts payable, the remaining current items (like prepaid expenses, other receivables, accrued taxes, and deferred revenue) are grouped together into this single line item. It captures all the small or miscellaneous adjustments needed to reconcile net income to cash flow.
What's Included vs. Excluded
The primary working capital accounts are typically shown as their own line items on the cash flow statement. These include:
- Change in Accounts Receivable
- Change in Inventory
- Change in Accounts Payable
āChange in Other Working Capitalā then captures the net effect of all other operating current assets and liabilities. Common items bundled into this category include prepaid expenses, deferred revenue, accrued expenses (like taxes, interest, or wages payable), and customer deposits.
Cash Impact and Calculation
The cash impact follows the standard rules of working capital. An increase in an 'other' current asset or a decrease in an 'other' current liability represents a use of cash (a negative adjustment). Conversely, a decrease in an 'other' current asset or an increase in an 'other' current liability is a source of cash (a positive adjustment).
Simple Rule
If other assets rise or other liabilities fall, the change is negative (cash used). If other assets fall or other liabilities rise, the change is positive (cash provided).
Location and Purpose on the Cash Flow Statement
This line item appears in the Operating Activities section of the cash flow statement (when using the indirect method). It is one of the key adjustments that reconciles a company's net income to its net cash from operations.
Companies aggregate these accounts primarily for simplicity and clarity. Grouping them prevents the cash flow statement from becoming cluttered with numerous small, variable line items. As UncleStock notes, this line is āone of the major ways that net income and operating cash flow can differā. While often minor, analysts watch for large swings in this line, as they could indicate unusual one-time effects like a large tax prepayment or a change in customer deposit activity.
Real-World Examples
Arcadis (2024)
Lam Research (2007)
Key Takeaways
It is a catch-all line in the Operating Activities section for working capital changes not individually detailed.
Common components include prepaid expenses, accrued liabilities, deferred revenue, and customer deposits.
The cash impact follows standard working capital rules: an increase in 'other assets' is a use of cash (negative), while an increase in 'other liabilities' is a source of cash (positive).
It helps explain the difference between net income and cash flow without cluttering the financial statement.
Large or unusual swings in this line can signal one-time events that may require further investigation by an analyst.
Change In Other Working Capital
A catch-all line on the cash flow statement that captures the net cash impact of miscellaneous current operating assets and liabilities.
āChange in Other Working Capitalā refers to the net change in miscellaneous current operating assets and liabilities not explicitly broken out elsewhere on the cash flow statement. After accounting for major items like accounts receivable, inventory, and accounts payable, the remaining current items (like prepaid expenses, other receivables, accrued taxes, and deferred revenue) are grouped together into this single line item. It captures all the small or miscellaneous adjustments needed to reconcile net income to cash flow.
Table of Contents
What's Included vs. Excluded
The primary working capital accounts are typically shown as their own line items on the cash flow statement. These include:
- Change in Accounts Receivable
- Change in Inventory
- Change in Accounts Payable
āChange in Other Working Capitalā then captures the net effect of all other operating current assets and liabilities. Common items bundled into this category include prepaid expenses, deferred revenue, accrued expenses (like taxes, interest, or wages payable), and customer deposits.
Cash Impact and Calculation
The cash impact follows the standard rules of working capital. An increase in an 'other' current asset or a decrease in an 'other' current liability represents a use of cash (a negative adjustment). Conversely, a decrease in an 'other' current asset or an increase in an 'other' current liability is a source of cash (a positive adjustment).
Simple Rule
If other assets rise or other liabilities fall, the change is negative (cash used). If other assets fall or other liabilities rise, the change is positive (cash provided).
Location and Purpose on the Cash Flow Statement
This line item appears in the Operating Activities section of the cash flow statement (when using the indirect method). It is one of the key adjustments that reconciles a company's net income to its net cash from operations.
Companies aggregate these accounts primarily for simplicity and clarity. Grouping them prevents the cash flow statement from becoming cluttered with numerous small, variable line items. As UncleStock notes, this line is āone of the major ways that net income and operating cash flow can differā. While often minor, analysts watch for large swings in this line, as they could indicate unusual one-time effects like a large tax prepayment or a change in customer deposit activity.
Real-World Examples
Arcadis (2024)
Lam Research (2007)
Key Takeaways
It is a catch-all line in the Operating Activities section for working capital changes not individually detailed.
Common components include prepaid expenses, accrued liabilities, deferred revenue, and customer deposits.
The cash impact follows standard working capital rules: an increase in 'other assets' is a use of cash (negative), while an increase in 'other liabilities' is a source of cash (positive).
It helps explain the difference between net income and cash flow without cluttering the financial statement.
Large or unusual swings in this line can signal one-time events that may require further investigation by an analyst.
Related Terms
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