Other Expenses

Other expenses are those expenses that are non-operating and do not have any relation with the main business operations. These include interests, sales of assets, impairments and restructuring costs, etc.

Other Expenses Definition

These expenses do not relate to the company’s primary business and are considered the residual bucket in the Income Statement. In the income statement, there are expenses like finance costs, fees and commission expenses, cost of material consumed, impairment on financial instruments, purchase of stock in trade, employee benefits expenses, DepreciationDepreciationDepreciation is a systematic allocation method used to account for the costs of any physical or tangible asset throughout its useful life. Its value indicates how much of an asset’s worth has been utilized. Depreciation enables companies to generate revenue from their assets while only charging a fraction of the cost of the asset in use each year. read more, amortizationAmortizationAmortization of Intangible Assets refers to the method by which the cost of the company's various intangible assets (such as trademarks, goodwill, and patents) is expensed over a specific time period. This time frame is typically the expected life of the asset.read more, etc. Therefore, all the expenses, which do not form part of the above, will be part of it.

As per the statutory guidelines, if it is more than the specified percentage of turnover, the same may be needed to be disclosed separately.

List of Other Expenses

There is not an exhaustive list that specifies it. However, the list of other expenses may include the following depending on the industry and nature of business –

Other Expenses

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For eg:
Source: Other Expenses (wallstreetmojo.com)

  • Rent
  • Repairs
  • Insurance
  • Rates and Taxes
  • Tax Penalties
  • Power and Fuel
  • Consumptions of Spares

Examples

Let’s see some simple examples to understand it better.

Example #1 American Apparel, Inc

Below are the various expenses of American Apparels:

  • Salary and wages- $692 million
  • Rent- $32 million
  • Professional fees – $127 million
  • Printing and stationery – $43 million
  • Depreciation & amortization – $91 million
  • Cost of materials – $1,292 million
  • Advertisement expenses – $22 milion
  • Interest expenses – $93 million.

Solution:

We can calculate it as,

Other Expenses Example 1

= $32 million + $127 million + $43 million + $22 million

= $224 million

Thus, in the income statement of American Apparels, it will disclose as $224 million.

Example #2 Prudential Plc

Below are the expenses of Prudential PLC:

Solution :

Mathematically, we represent it as,

Processing charges + Repairs and maintenance + Recovery of doubtful debts + Loss on sale of Assets + Business process outsourcing expense + Rent + Power and fuel + Directors commission + Legal and professional expense  + Rates and taxes + Exchange differences + Payment to auditors + Communication costs + Royalty paid + Travelling and conveyance + Trade incentives + Insurance

We can calculate it as,

Other Expenses Example 2

= £3,421 million + £105 million + £6 million + £52 million + £827 million + £1,184 million + £143 million + £55 million + £73 million + £2 million + £78 million + £112 million + £44 million + £23 million + £32 million + £39 million + £57 million

= £6,253 million

Thus, in the income statement of Prudential Plc, it will disclose as £6,253 million.

Important Points to Note

Other Expenses are not directly related to the business but are ancillary in nature.

Conclusion

Expenses and revenues are the main base of the Income statementThe Main Base Of The Income StatementThe income statement is one of the company's financial reports that summarizes all of the company's revenues and expenses over time in order to determine the company's profit or loss and measure its business activity over time based on user requirements.read more. Bifurcation, presentation, and measurement are the components of high importance and require professional judgment. “Other expenses” under the expenses show the major overheads for the business, which must be reduced to a greater extent to increase the company’s profitability. Every nation has its own set of guidelines needed for the annual financial statements.

Recommended Articles

This has been a guide to what is Other Expenses and their definition. Here we discuss the list of other expenses, along with practical examples and explanations. You can learn more about accounting from the following articles –

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