Why aren't investment costs included in fixed cost in a form of amortization or depreciation costs

Retirement homes
New answer on Sep 19, 2019
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Moe asked on Sep 19, 2019

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Andrea
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replied on Sep 19, 2019
OW | HEC Paris | Helped 20+ people entering BCG, OW, ATK etc.

Hi,

that would be an accounting view (investment going to the BS and then depreciating in the IS).
But when you look at NPVs you just look at cash outlays, e.g. investment in Year0 and fixed + variable cost in year 1,2,3 ...

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Fernando
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replied on Sep 19, 2019
Former Director in Big Four Firms, Operations, M&A and Cash Management Expert

Hi there,

I guess that"s somewhat a matter of accounting definitions. As a general rule costs get recorded in the P&L and Investments in the balance sheet. Investments can be depreciated over a number of years to recognise their loss of value with the time. Costs are directly recognised as incurred in the P&L.

I hope this helps.

Best, Fernando

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Andrea gave the best answer

Andrea

OW | HEC Paris | Helped 20+ people entering BCG, OW, ATK etc.
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