Creative Accounting 101

Did you know that it is apparently kosher to allocate depreciation expense to marketing expense, R&D, interest expense(?) and administration expense and not have it as a separate line item on an income statement? I just spent an interesting afternoon going through an income statement like that. Ahhaha and it was audited by one of the big four cos!

They seem nice.

On Monday I’ll go through the balance sheet and cash flow. It’s going to be a treat!

This is pretty common with US financials. All of the depreciation is disclosed on the cash flow statement so that is a better approach than using any depreciation disclosed on the income statement which may be incomplete.

Thanks, I didn’t know that. This isn’t a US company and they’re supposed to follow IFRS. Do you know what is the logic in splitting depreciation under different line items on the income statement?

A lot of times it is broken out separately for companies with a cost of goods sold line on their income statement. This allows them to allocate depreciation to COGS for more accurate gross margins.

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