Non-Operating Expense: Definition and Examples

By 澳洲幸运5开奖号码历史查询:Alicia Tuovila

Updated March 24, 2022

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JeFreda R. Brown

Fact checked by

Ariel Courage

Definition

A non-operating expense is a cost not associated with a company's core operating activities.

What Is a Non-Operating Expense?

A non-operating expense is a business expense unrelated to coreꦇ operations. The most common types of non-operating expenses are interest charges and losses on the disposition of assets. Accountants sometimes remove non-operating expenses a🍰nd non-operating revenues to examine the performance of the core business, excluding the effects of financing and other items.

Non-operating expenses can be contrasted with operating expenses, which relate to the day-to🔴-day functioning of a business.

Key Takeaways

A non-operating expense is incurred when a cost doesn't directly relate to a firm's primary or core business.
Non-operating expenses are deducted from operating profits and accounted for at the bottom of a company's income statement.
Examples of non-operating expenses include interest payments, or costs, from currency exchanges.

Understanding Non-Operating Expense

Non-operating expense, like its name implies, is an accounting term used to describe expenses that occur outside of a company's day-to-day activities. These types of expenses include monthly charges like interest payments on debt and can also include one-time or unusual costs. For example, a company may categorize any costs incurred from 澳洲幸运5开奖号码历史查询:restructuring, 澳洲幸运5开奖号码历史查询:reorganizing, or 🉐costs from c൩urrency exchange as non-operating expenses.

Non-operating expenses are recorded at the bottom of a company's 澳洲幸运5开奖号码历史查询:income statement. The purpose is to allow financial statement users to assess✃ the direct business activities that appear at the 🃏top of the income statement alone. Generating profit from core operations is critical for a company.

Special Considerations

When looking at a company's income statement from top to bottom, 澳洲幸运5开奖号码历史查询:operating expenses are the first costs displayed below revenue. The company starts the preparation of its income statement with top-line revenue. 澳洲幸运5开奖号码历史查询:Cost of goods sold (COGS) is subtracted from revenue to arrive at 澳洲幸运5开奖号码历史查询:gross income.

After gross income is calculated, operating costs are subtracted to get the company's 澳洲幸运5开奖号码历史查询:operating profit, or earnings before interest and tax (EBIT). After operating profit has been derived, non-operating expenses are subtracted from operating profit to arrive at 澳洲幸运5开奖号码历史查询:earnings before taxes (EBT). Taxes are then deducted to derive 澳洲幸运5开奖号码历史查询:net income.

Non-Operating Expense Examples

Most public companies finance their growth with a combination of debt and equity. Regardless of the allocation, any business that has corporate debt also has monthly interest payments. This is considered a non-operating expense, as interest payments don't arise as a result of a business' operations but because of the financing of the operations.

If a company sells a building, and it's not in the business of buying and selling real estate, the sale of the building is a non-operating activity. If the building were sold at a loss, the loss is considered a non-operating expense.

Frequently Asked Questions

Why do companies separate out non-operating expenses?

When looking at how a company generates profits, unde🌳rstanding its profits from core operations, net of direct operating expenses, is critical. Costs unrelated to these operationꦚs impact the bottom line, but they may not indicate how well a company is running.

What are examples of non-operating expenses?

Interest payments, the costs of disposing of property or assets not related to operations, restructuring costs, inventory write-downs, lawsuits, and other 澳洲幸运5开奖号码历史查询:one-time charges are common examples of non-operating expenses..

Are rent and utilities non-operating expenses?

Typically, no. These would both be directly related to a business' core operations, since without paying rent and utilities, the firm wouldn't be able to function.

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