Where to place R&D on a model

In my downtime I am trying to do some modelling, working on a preliminary model for a client we are advising.

I'm going through the financial statements (print outs), building the model from scratch essentially using some of the models on our server as a reference.

The issue, as such, is on the client's financial statements they don't include R&D in Operating Expenses so it is not impacting EBITDA, Net Profit etc. on PnL.

Is this wrong? I BELIEVE I should be putting it in with Operating Expenses. If this is the case, is this company committing fraud?

 

check to see if they're capitalizing it elsewhere as an asset

"After you work on Wall Street it’s a choice, would you rather work at McDonalds or on the sell-side? I would choose McDonalds over the sell-side.” - David Tepper
 
Best Response

they can under certain accounting capitalize D once proven but rarely R (only in software i think) so you'd just see it as an intangible.

okay, then it may be in COGS. unlike D&A which is visible in the cash flow it may be hard to pin it down and they could hide it and aren't required to issue it as a separate line item.

"After you work on Wall Street it’s a choice, would you rather work at McDonalds or on the sell-side? I would choose McDonalds over the sell-side.” - David Tepper
 

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