Changes in Non-Current Assets
Apart from the funds from operations, the transactions relating to non-current assets also require some special consideration. The changes in non-current assets like patents, goodwill and other intangible are due to their amortization or acquisitions. If there is a decrease in their balances, it is reasonable to assume. in the absence of information to the contrary, that the asset has been mortised. An increase, on the other hand. implies purchase of an asset and accordingly should be indicated as use of funds.
The changes in other non-current assets particularly plant and equipment account require a more careful analysis to ascertain funds obtained from their sale or funds used in their acquisition.
For this purpose, we should examine three things: (i) increase deserve in plant and equipment account and accumulated depreciation (if plant and equipment is maintained on gross basis). (ii) gains or losses in the profit and loss account indicating that plant and equipment have been sold, and (iii) other information relating to the acquisition and retirement of plant and equipment that accompanies the financial statements.