Explanation:
In a statement of cash flows, the indirect method is used to report the cash inflows and outflows from operating activities, investing activities, and financing activities.

Inventory:
Inventory refers to the goods or products that a company holds for sale or use in the production process. When the inventory decreases, it means that the company has sold or used some of its inventory during the period.

Effect on Cash Flow:
The decrease in inventory has an impact on the cash flow from operating activities because it directly affects the company's cost of goods sold (COGS).

COGS:
COGS represents the direct costs incurred in producing or acquiring the goods that are sold by a company. It includes the cost of raw materials, direct labor, and manufacturing overhead.

Calculation:
To calculate the cash flow from operating activities using the indirect method, the change in inventory is adjusted by adding the decrease in inventory or subtracting the increase in inventory.

Reasoning:
The decrease in inventory should be reported as an addition (positive adjustment) because it represents a reduction in the company's expenses. When the inventory decreases, it means that the company has sold or used some of its inventory, resulting in lower costs. As a result, the decrease in inventory increases the cash flow from operating activities.

Example:
For example, if a company's inventory decreases by $10,000 during the period, the decrease in inventory would be added back to the net income in the operating activities section of the statement of cash flows. This adjustment would increase the cash flow from operating activities by $10,000.

Conclusion:
Therefore, in a statement of cash flows (indirect method), a decrease in inventory should be reported as an addition because it increases the cash flow from operating activities.