Noncash

Noncash is an adjective used to describe transactions or charges that do not involve the transfer of cash. In accounting and finance, the term helps distinguish between items that affect a company’s accounting results but do not immediately alter its cash position.

Common noncash items include depreciation and amortization, which allocate the cost of tangible and intangible assets over their useful lives; impairment charges; provisions and adjustments for doubtful accounts; stock-based compensation; and certain write-downs or gains recognized on assets that do not correspond to cash receipts or payments. Although these items reduce or increase net income, they do not generate or consume cash in the period in which they are recognized.

In financial reporting, noncash items are added back or subtracted in the cash flow statement when reconciling net income to net cash from operating activities; and the cash flows from investing and financing activities may include noncash transactions such as issuing stock for assets or acquiring businesses through stock consideration. IFRS and US GAAP require disclosure of significant noncash investing and financing activities.

Noncash concepts also appear in tax and valuation contexts. For example, depreciation provides a tax deduction but is a noncash expense; stock-based compensation can have tax effects yet is a noncash expense on the income statement.

Limitations: Noncash measures may be influenced by accounting choices and estimation; investors should consider both cash and noncash items to assess liquidity and operating performance.