A depreciation expense has a direct effect on the profit that appears on a company's income

statement. The larger the depreciation expense in a given year, the lower the company's reported
net income – its profit. However, because depreciation is a non-cash expense, the expense doesn't
change the company's cash flow. Depreciation does not directly impact the amount of cash
flow generated by a business, but it is tax-deductible, and so will reduce the cash outflows related
to income taxes.  Thus, depreciation affects cash flow by reducing the amount of cash a business
must pay in income taxes. Depreciation is a non-cash expense but eligible for a tax deduction. So
tax saved on depreciation expense should be considered in relevant cash flows valuation in capital
budgeting, All the relevant cash flows must be identified and considered in project evaluation.
When a company prepares its income tax return, depreciation is listed as an expense, and so
reduces the amount of taxable income reported to the government (the situation varies by country).
If depreciation is an allowable expense to calculate taxable income, then its presence reduces the
amount of tax that a company must pay. Thus, depreciation affects cash flow by reducing the
amount of cash a business must pay in income taxes.
Types of leasing arrangements :

1. Common Elements: Any lease agreement must fully identify all parties to the transaction,
including any with a subsidiary or secondary claims, and the asset being leased, including
descriptions of real estate or equipment. Terms and conditions must specify the length of the
lease, amount and options for payment, responsibility for maintenance and repair, provisions
for default and other terminations. It also should state what laws govern the agreement.
2. Real Estate: A real estate lease requires the legal description of the property and its use,
whether residential or commercial. A business lease should be in the name of the corporation
or company, both lessor and lessee, and be signed by appropriate officers of each entity. It
should cover such items as payment for utilities, trash disposal, building repairs and special
conditions such as licenses from municipal and state regulatory agencies for the use.
3. Equipment and Machinery: Equipment and machinery agreements are similar to vehicle
leases, but may include such special options as varying payments to conform to seasonal
usage or to defer payments until a specific task is completed. These also must detail the
equipment involved and include any restrictions on operation, such as commercial driver or
heavy equipment operator licenses.

4. Licenses: A licensing agreement is a form of lease, giving a user the right to use music,
artwork, computer code or similar intangible property for a specified purpose or time, with a
fee or royalty. Licensing agreements may be open-ended, for continuing regular use, or one
specific application or performance. A business generally will have license agreements for
computer systems and similar equipment.
Comment 

References :
1. Merritt, C. (2019, January 11). What Is the Impact of Depreciation Expense on Profitability?
Retrieved from :
https://smallbusiness.chron.com/impact-depreciation-expense-profitability-55349.html
2. Bragg, S. (2019, April 16). How depreciation affects cash flow. Retrieved from :
https://www.accountingtools.com/articles/how-does-depreciation-affect-cash-flow.html