Financing through depreciation or provisions

Financing through depreciation refers to the financial effect of recording depreciation as a cost component of the company's revenues on turnover. However, depreciation, unlike other costs such as salaries and wages or equipment costs, does not give rise to payments and is therefore available to the company in the form of cash.

Financing through provisions, sometimes also known as financing through the dissolution of provisions, is a form of internal financing.

Until the provisions are used, the company's funds can be used to finance the company, sometimes even on a long-term basis, as is the case with provisions for pensions, for example.

The financial effect of the provisions comes from the availability to the company of “acquired” provisions on turnover until the actual use of the provision, since they do not (immediately) involve a payment.

Last modification 27.02.2020

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