Investopedia

Continue to Site »

Non-Cash Charge

Filed Under » , , ,
Dictionary Says

Definition of 'Non-Cash Charge'

A charge made by a company against earnings, which does not require an outlay of cash. Non-cash charges will lower earnings in the period when the charge was taken, and if it is large enough, can even turn a net profit into a loss. Many companies are inclined to treat non-cash charges as one-time events - even if they appear somewhat frequently - and report adjusted earnings that exclude the impact of such charges.

A non-cash charge may also be referred to as a write-down.

Investopedia Says

Investopedia explains 'Non-Cash Charge'

Non-cash charges are typically against the depreciation, amortization and depletion accounts on a company's balance sheet. Companies take these charges against earnings due to extraordinary circumstances such as accounting policy changes or significant depreciation in the market value of an asset or inventory.

For example, assume company A acquires company B for $500 million, of which $200 million is attributed to goodwill on its balance sheet. If company A subsequently discovers that B is not as valuable as it estimated at the time of acquisition, it may take a non-cash charge of say $100 million against goodwill. This charge will affect A's earnings in the period when it books the non-cash charge.

Articles Of Interest

  1.

    Impairment Charges: The Good, The Bad And The Ugly

    Impairment charge is a term for writing off worthless goodwill, but you need to know what its potential impact is on EPS.

  2. Biggest Merger and Acquisition Disasters

    Find out which companies collapsed after merging.

  3. Earnings Guidance: Can It Accurately Predict The Future?

    Explore the controversies surrounding companies commenting on their forward-looking expectations.

  4. What Type Of Trader Are You?

    There are different ways stock traders attempt to profit from market movements. Which of the strategies do you use?

  5. Mergers And Acquisitions: Understanding Takeovers

    In the dramatic world of M&As, battleground terms meld with bizarre metaphors to form the language of the game.

  6. Interpreting A Company's IPO Prospectus Report

    Learn to decipher the secret language of the IPO prospectus report - it can tell you a lot about a company's future.

  7. After A Big Recovery Rally, It's Up To Renew Blue For Best Buy

    Investors have bought Best Buy's story, but this quarter shows that a lot of work remains to be done

  8. If You Don't Mind Volatility, Deere Could Still Do Alright

    Though Deere's shares sold off after earnings, the business model is sound and rolling along.

  9. Agilent Isn't Making It Easy On Investors

    Core operating performance at Agilent needs to improve

  10. Consumer Spending As A Market Indicator

    What people buy and where they shop can provide valuable information about the economy.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Validation Period

    The amount of time necessary for the premium on an insurance policy to cover the commissions, the cost of investigation, medical exams and other expenses associated with the issuance of the policy.

  2. Winner's Curse

    Because of incomplete information, emotions or any other number of factors regarding the item being auctioned, bidders can have a difficult time determining the item's intrinsic value. As a result, the largest overestimation of an item's value ends up winning the auction.

  3. Glocalization

    A combination of the words "globalization" and "localization" used to describe a product or service that is developed and distributed globally, but is also fashioned to accommodate the user or consumer in a local market.

  4. Disaster Loss

    A special type of tax-deductible loss, similar to a casualty loss, where a loss has been incurred by taxpayers who reside in an area that has been designated as a federal disaster area by the President.

  5. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.

  6. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.
Trading Center