Introduction
Below the operating, investing and financing sections, most cash flow statements carry a short block of supplemental information that is easy to skip. It answers two questions the main sections cannot. How much cash did the company actually pay in interest and income taxes? And which significant investing and financing transactions happened without any cash changing hands? Costco's block, for example, reports $106 million of interest paid and $2.9 billion of income taxes paid in fiscal 2025, along with $193 million of capital expenditure that had been incurred but not yet paid.
Those figures matter because the three sections are built only from cash. A building bought with a mortgage from the seller, a bond converted into shares or an acquisition paid in stock changes the balance sheet substantially without appearing anywhere in operating, investing or financing activities. The supplemental disclosures close that gap by listing these non-cash transactions separately.
Cash Paid for Interest and Income Taxes
Under Accounting Standards Codification (ASC) 230, companies that use the indirect method, as most do, disclose the cash actually paid for interest, net of amounts capitalized, and for income taxes, net of refunds. These amounts differ from interest expense and tax expense on the income statement because of interest accrued but not yet paid, amortization of debt issuance costs and discounts, deferred taxes and the timing of tax payments.
| Line item | 2024 | 2025 |
|---|---|---|
| Cash paid during the year for | ||
| Interest | 129 | 106 |
| Income taxes, net | 2,319 | 2,917 |
| Non-cash activities | ||
| Capital expenditures included in liabilities | 203 | 193 |
Source: Costco fiscal 2025 Form 10-K.
For a banker, these lines are the most direct check on two assumptions in any model: the cash interest rate on the company's debt and its cash tax rate, the share of pre-tax income actually paid in tax. Costco's fiscal 2025 annual report shows income taxes paid rising by about $600 million in a single year, a change that a forecast should trace to earnings growth, deferred tax balances or the timing of payments rather than simply extrapolate. Why cash and book taxes diverge is covered in effective, statutory and cash tax rates.
- Non-cash investing and financing activities
Investing or financing transactions that change a company's assets, liabilities or equity without any cash receipt or payment, such as acquiring assets by assuming debt, converting debt into shares, or acquiring a business in exchange for stock. They are excluded from the cash flow statement's three sections and disclosed separately.
Transactions That Move No Cash
Deloitte's roadmap on non-cash investing and financing activities explains that such transactions should be disclosed in a schedule or in narrative form, either on the face of the statement or in another part of the financial statements that refers to it. Typical examples include:
- Assets acquired with debt: a building bought with a mortgage provided by the seller, or equipment financed directly by the manufacturer.
- Finance leases: assets obtained under new finance leases, which add an asset and a liability without cash.
- Debt converted into equity: convertible bonds exchanged for shares.
- Acquisitions paid in stock: a business bought in exchange for the acquirer's shares, disclosed as both a non-cash investing and a non-cash financing transaction.
- Capital expenditure not yet paid: equipment received before the period end and paid afterwards.
Lessees also disclose the right-of-use assets obtained in exchange for new lease liabilities, a figure that shows how much new lease financing the company took on in the year, explained in lease accounting under ASC 842.
Why Bankers Read the Bottom of the Statement
The supplemental block helps reconcile the cash flow statement with the balance sheet. When debt rises more than the financing section shows, a non-cash item such as debt assumed in an acquisition or a new finance lease usually explains the gap; when property grows faster than capex, unpaid capex or leased assets are often the reason. Reading the block first saves time when a roll-forward of debt or property does not tie, a process covered in property, plant and equipment (PP&E) and debt roll-forwards.
It also highlights commitments that will soon consume cash, such as capex already incurred but unpaid, and transactions that change capital structure without passing through the main sections, such as conversions and stock-financed deals. A banker reviewing a company's capital allocation should read this block alongside the investing and financing sections, because together they show everything the company invested and every way it was financed, cash or not.
