Standard Format (Classification of Expenses by Function) (+2)

Standard Format (Classification of Expenses by Function)

Revenue
  Product revenue
  Service revenue
  Other revenue
Total Revenue

Cost of Revenue
  Product costs
  Service costs
Total Cost of Revenue

Gross Profit

Operating Expenses
  Research and development
  Sales and marketing
  General and administrative
Total Operating Expenses

Operating Income (Loss)

Other Income (Expense)
  Interest income
  Interest expense
  Other income (expense), net
Total Other Income (Expense)

Income (Loss) Before Income Taxes
  Income tax expense (benefit)
Net Income (Loss)

Earnings Per Share (if applicable)
  Basic
  Diluted

GAAP Presentation Requirements (ASC 220 / IAS 1)

• Present all items of income and expense recognized in a period
• Classify expenses either by nature (materials, labor, depreciation) or by function (COGS, R&D, S&M, G&A) — function is more common for US companies
• If classified by function, disclose depreciation, amortization, and employee benefit costs by nature in the notes
• Present operating and non-operating items separately
• Show income tax expense as a separate line
• Extraordinary items are prohibited under both US GAAP and IFRS
• Discontinued operations presented separately, net of tax

Common Presentation Considerations

• Revenue disaggregation: ASC 606 requires disaggregation of revenue into categories that depict how the nature, amount, timing, and uncertainty of revenue are affected by economic factors
• Stock-based compensation: Classify within the functional expense categories (R&D, S&M, G&A) with total SBC disclosed in notes
• Restructuring charges: Present separately if material, or include in operating expenses with note disclosure
• Non-GAAP adjustments: If presenting non-GAAP measures (common in earnings releases), clearly label and reconcile to GAAP