Depreciate and Amortization | The Investment Quadrant by The Fifth Person

Questions › Category: Investor Psychology › Depreciate and Amortization

Victor Lee asked 3 months ago

Hi team,
For calculation within income statement, wondering if depreciation and amortization should be included when calculating SGA Expense or Extraordinary Items or none of these categories (i.e. leave them out of both SGA and Extraordinary Items)? I realised that for some companies with high depreciation and amortization, inclusion into SGA tends to distort the outcome and inclusion into Extraordinary Items can inflate the Net Profit Attributable to Ord. Shareholders (Excl Extraordinary Items).
Thank you.

2 Answers

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Victor Chng answered 3 months ago

Hi Victor,

You should not remove the depreciation and amortisation as it is real expenses that have been incurred.

Victor Lee replied 2 months ago

Hi Victor,

Noted and thank you. Since amortization and depreciation is a real expense, should it be classified as SGA or Cost of Revenue?

Victor Lee replied 2 months ago

Hi Victor,

Noted and thank you. Since amortization and depreciation is a real expense, should it be classified as SGA or Cost of Revenue?

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Victor Chng answered 2 months ago

Hi Victor,

Depreciation and amortisation are under SGA. When you collect the numbers in the income statement, the amount has been included already.

Victor Lee replied 2 months ago

Got it! Thank you Victor