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Income statement (deeper)

Depreciation & Amortization D&A

Non-cash charges that spread the cost of long-lived assets over the years they are used.

Part of the Reading Financial Statements course · Lesson 8 of 33
Formula
Straight-Line Depreciation = (Asset Cost − Salvage Value) ÷ Useful Life

What it is

Depreciation spreads the cost of tangible assets like machinery, buildings, and equipment over their useful lives, while amortization does the same for intangible assets like patents, software, and acquired customer lists. Both are non-cash expenses — the cash went out when the asset was bought, and these charges just allocate that cost over time. D&A appears as an expense on the income statement and is added back on the cash-flow statement.

Why it matters

D&A reduces reported profit without consuming cash in the period, which is why it is added back to compute EBITDA and operating cash flow. The size of D&A relative to capital spending also hints at whether a company is reinvesting enough to maintain its asset base.

How it's calculated

Each asset's cost (less any salvage value) is divided over its estimated useful life, most commonly on a straight-line basis; the period's D&A is the sum across all assets being depreciated or amortized.

How Quintarthai uses it

D&A is shown on the Financials 10-yr tab and feeds the EBITDA and cash-flow figures on a company's deep-analysis page — open a company page.

Cross-border note. Both US GAAP and IFRS (common among Canadian filers) record D&A, but for tax purposes the US uses MACRS schedules while Canada uses the Capital Cost Allowance (CCA) system — so book D&A on the income statement can differ from the depreciation actually claimed on the tax return in either country.

FAQ

What's the difference between depreciation and amortization?
They work identically; the difference is the asset type. Depreciation applies to tangible (physical) assets like equipment and buildings, while amortization applies to intangible assets like patents, licenses, and capitalized software.
Why is D&A called a non-cash expense?
Because no money leaves the company in the period it is recorded — the cash was already spent when the asset was purchased. D&A only allocates that earlier cost across the asset's useful life, which is why it gets added back when calculating cash flow and EBITDA.
Related terms
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