InterDigital Inc (IDCC)

[The Count]

Cash flow

Cash flow measures the change in cash. Therefore the use of the NOL against taxable income on it's tax return will help the cash flow when it is utilized by reducing the amount of actual tax paid. In IDCC's case, this is not an optional treatment on the tax return.

Where IDCC does have some discretion is on the financial statements. Management determines when they feel that benefit is likely to occur and can offset and can credit the P&L as they deem appropriate. However this does NOT affect the cash flow. As Olddog pointed out, the income from the recognition of income tax benefits was reversed on the cash flow.

IDCC uses the indirect method to do the cash flow. They start with taxable income and then make adjustments for items of income and expense that do not effect tax. So things like the recognition of the tax benefit that increase income in whatever quarter managment deems appropriate are adjusted out of the cash flow. The beginning cash, change in cash and ending cash are not affected by the accounting method (cash, accrual, GAAP) or the accounting estimates (depreciation rates, income tax accruals) used. Those affect the income, but cash is cash.

This is greatly over simplified, but I hope it provides some clarity to those of you smart enough not too muddle your head with boring accounting stuff.

Frank