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GAAP and Depreciation Question
So I had an IB interview for a boutique recently, and I was asked this question: "Tell me how this affects the 3 statements: Let's say D&A goes up by 10 for GAAP purposes, but for tax purposes, your D&A only goes up by 5 dollars, and the tax rate is 50%." What's the answer to this? I had no idea...
Taxable Income using Book and Tax Depreciation
HI all, I'm reviewing a model where the tax calculation is done as follows: Pre-Tax Income Plus: Book Depreciation Less: Tax Depreciation = State Taxable Income Note: the Pre-Tax Income number is from the Income Statement, and is net of book depreciation, which is why it's added back in the...
COGS Depreciation in Turnover Days
When calculating inventory and A/P days outstanding, is it right/wrong/better to include or exclude COGS depreciation from the calculation? And I’m not thinking company or industry-specific, just in general. If a company embeds depreciation in COGS, and you have access to that number, should you...
Predicting D&A in the future
If you know the amount CapEX will grow by over the next 10 years, how would you predict how much D&A would grow by.
Manufactured Housing Community - Depreciation
Hello WSO Community! I am working to acquire a portfolio of manufactured housing communities and have a few questions regarding depreciation I was hoping to find answers to or be pointed in the right direction. My questions are: 1. Other than the land component, is the infrastructure at the...
Depreciation in the FCFF DCF model
Hi all, I'm trying to calculate FCFF for a company for a DCF and depreciation ends up making up a massive proportion of the FCFF (~60-75%), overriding any effects of the net income projections on the projected price. How should I interpret these results and are there any red flags I should be...
Technical Question: Depreciation/Half-Year Convention
Going over some of the WSO PE prep material, and one of the prompts says a project will take 2 years to complete. Approximately 75% of the project is being complete in year 1, and the remaining 25% will be completed in year 2. Useful life of the project is 10 years. The CapEx for the project in year...
Depreciation in COGS
I am working on the factory financial model . Therefore, depreciation costs of the Plant and Equipment are included in COGS, as these fixed assets are used in the direct production of the inventory. My question is - as far as all the fixed assets company owns is just an equipment that is used in...
Depreciation in COGS and EBITDA
I am working on the factory financial model. Therefore, depreciation costs of the Plant and Equipment are included in COGS, as these fixed assets are used in the direct production of the inventory. My question is - as far as the company owns only assets that are used in production (and no other...
Depreciation not in Income Statement
Guys, I am building an operating model for J.M. Smucker's - see link for 10K below. Depreciation is not reported in the IS, only in the CFS. My understanding is that it should be captured in SG&A. However, page 26 of the 10K breaks out Selling, Distribution & Administrative, which apparently doesn't...
Differences in depreciation pn income statement and cash flow statement
I have noticed that Lowes has about a $100 million difference between depreciation expense on income statement and cash flow statement. Cash flow statement is higher. Yet, they have virtually no intangible assets, only $7 million of interest amortization, and while they have deferred acquisition...
How Sale of PPE flow through the 3 statements? (with some twists)
A day ago I had an interview for an IB position and was asked the following question, which in general is simple, but some details got me confused: A piece of equipment was bought 5 years ago for 100k. Annual depreciation is 10k . In the middle of this fiscal year the equipment was sold for 20k. How...
Depreciation attributable to cost of revenue and SG&A
If a firm is putting depreciation as separate line item for SG&A and Cost of revenue, how would you project it? I generally do Depreciation as % of PP&E but here I am a little confused. Depreciation under cost of revenue historically seems to be consisitently around 2.3% of net revenue but...
Depreciation/Amortization related Question
I wanted to know how would a manufacturing/services related company in Aerospace sector in USA, depreciate its assets and amortize its IP assets? any specific method they follow, Straight line, Double declining? Can someone please explain
Fully depreciated assets
Hi forum. Could anyone please help me to learn how to identify fully depreciated assets among total gross fixed assets? If company has gross PPE=100, Net PPE=50 and hence accumulated deprec of 50, how can I find out what portion of gross ppe is not being depreciated, that is what portion of gross...
EV/EBITDA vs EV/EBIT vs EV/(EBITDA-capex)? Please help?
Hi guys, Could someone please help explain the difference of when to use EV /EBIT vs EV /( EBITDA -capex)? I know you generally use EV /EBIT for companies with high capex, why though? Because of the high D&A, but don't you want to account for that? like EBITDAR for airlines, gaming/casinos, etc? I...
DCF - Tax or Book Depreciation?
When doing a DCF , should you be using the company's book depreciation, or tax depreciation? I assume tax, but wanted to check.
Need Some Help
I know a variation of this question is posted almost everyday, but I can't figure this one out. Friend of mine got this in a first round. Just a simple accounting question: Purchase $100 PPE (10 yr straight line) Financed by 50% Equity, 50% Debt (10% Interest) 40% Tax Flow through stmts for year 1:...
Help with Depreciation
HI all, Would really appreciate your insight. So the firm has $1800 depreciation on I/S and $2600 on C/F. What is the difference? Which one would you use for DCF ? Thank you
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