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Now I have a better sense of your question.

In my full-fledged defensive income statement, I depreciate acquisitions over 5 years. So if a company spends $1 billion to buy another company, I deduct $200 million a year for the next five years. In the 30-second version, the cash cost of acquisitions are omitted (unless, of course, you add an expense line yourself.)

In the enterprising income statement, a key difference is the depreciation period for intangibles. The 30-second version includes the direct cost of R&D or advertising, whereas the bigger model expenses them over their useful life.

These are two differences that quickly come to mind.

I like to use the bigger income statements because I find it useful to look at how a company has performed over the last several years. But you also want to fast-forward past companies of marginal interest. Thus, use both (all four) versions. In this business we can't be too careful.

If I didn't answer your question fully, please let me know. However, I will be away from Earnings Power headquarters for the next few days.


p.s., Thanks for buying the book!
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