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Moe

on Sep 19, 2019

Global

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

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Andrea

Coach

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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Coach

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