Capitalization and Depreciation Explained

CLARIFICATION: while R&D can be capitalized under IFRS (international accounting system), most R&D expenses cannot be capitalized under U.S. GAAP (the accounting system used by American companies).

Capitalization and depreciation can be confusing topics, but they are worth understanding, as they can materially impact the numbers you see on the income statement. Today we’ll go over the topics and what you can do to circumvent the impact of lax assumptions on profit numbers.

DISCLAIMER:
This channel is for education purposes only and is not affiliated with any financial institution. Richard Coffin is not registered to provide investment advice and as such does not provide recommendations on The Plain Bagel - those looking for investment advice should seek out a registered professional. Richard is not responsible for investment actions taken by viewers.

[ThePlainBagel]

Happy Friday! Do you have any tips for handling capitalization and depreciation? Let me know in the comments below!

[RoadToRetire]

Damn I watch your vids to get away from my accounting work 😂. Fixed asset accounting is my least favorite section to work on at my job. You did a good job explaining a weird topic 👍

[aeon]

This was a great introduction into a confusing concept. Thanks a lot!

[riceandpotatoes]

accounting!! "accountant here, goes and grabs some popcorn"

[zubochonk]

Thje more I watch your channel, the more I learn and realize how hard it is to pick stocks. Glad I chose to be a passive investor.

[jim]

Excellent! Concise, clear and engaging! Better than many of my accounting professors!

[prashunpcchakraborty]

If only I had this video in school back in the day, I spent hours, days, weeks to grasp these concepts.

[HowMoneyWorks]

Great video. I would say it's important to include that if you sell a fully depreciated asset for anything greater than $0, the depreciation must be "recaptured" in the income statement.


Also, make a video of the millions of ways to say "EBITDA" (joking, but this is the first time I've heard it said the way you said it)

[kimdejot]

Wow, you are amazing! These concepts were so confusing to me after reading so many differerent pieces online. You made it all super clear here! Thank ou!

[tiffanybloke]

This video should have millions of views. This was the best explanation of capitalization. What really helped was showing how it appears on the income statement. You are the only one that did that! Thanks!

[Dr.Unsteady]

This was supper beneficial to me as a student with a teacher who’s just reading definitions for lectures and no explanation or reasoning for anything. These help a lot for us that aren’t extremely high iq and no prior business experience. Thank you very much

[jayhay]

Great job. My wife and I are starting a new business and were discussing some of these topics days ago. You did good work in clarifying some very important accounting considerations.

[danbochman]

Wow you have a real talent for clear and concise explanations! Keep up the good work!

[cal]

I watch this having no experience or intention in going to anything involving major business finance, and yet I am here because the content is just that good.

[JamesSmith-nqns]

Mate, this is extremely articulate and concise. Well done!

[ponzianomanning]

Great explanation of these complicated topics in such a short time! excellent teaching skills! Thanks.

[andresj.s.]

I got so used to the way you make it all so easy to understand and entertaining that I find hard to watch any videos from any other creator. Keep the amazing work :D

[alexsmith]

This channel is so underrated. Great info!

[brianjames]

I have my masters in taxation and you explained this better than any professor I ever had.

[MrMineHeads.]

There are different ways that assets can depreciate. Straight line depreciation is just one way things can depreciate. There is also double declining, units of production, and sum of the years. They all have their own uses, but it is interesting to note the ways depreciation is used in accounting.