Example 7 of “Long-lived assets” (pages 432-434) asks you to calculate unadjusted and adjusted P/CFO. When calculating adjusted P/CFO, only the software development expenses are subtracted from CFFO.
Why is amortisation not subtracted from CFFO too? My understanding is that since the amortisation expense is removed from the income statement, it does not need to be added back to the operating cash flow. I would also be grateful if someone could explain why CFFO is reduced by $6,000 and not the after-tax amount.