A Peek Behind the Numbers

A Peek Behind the Numbers

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A Peek Behind the Numbers
A Peek Behind the Numbers
Amortization Isn’t a Cash Expense… Right?

Amortization Isn’t a Cash Expense… Right?

How lease accounting plus non-GAAP adjustments make expenses and cash costs disappear

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Behind the Numbers
Aug 25, 2023
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A Peek Behind the Numbers
A Peek Behind the Numbers
Amortization Isn’t a Cash Expense… Right?
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Amortization gets no respect these days. In a world where companies compete for more creative ways to adjust their results, amortization has become a mainstay on the non-GAAP noodling lists for most companies. We have covered how ignoring the amortization of acquired intangibles can distort reality for acquisitive companies, particularly those in research-intensive industries. However, the distortion of adding back amortization can be magnified for companies with high utilization of finance leases as the unique nature of GAAP lease accounting can lead to an overstated of both earnings and cash flows.

We will explore the details of capital lease accounting and its potential to distort results using Equinix (EQIX), Keurig Dr Pepper (KDP), and Iron Mountain (IRM) as real-life examples below.


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