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Why are intangibles like R&D and advertising not deducted as an expense on the defensive income statement?
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1. Use of cash

2. No assurance the investments will generate higher future sales and/or cost savings. To wit: Xerox!


Hewitt
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But that seems like you should deduct intangibles, I mean, deduct them from revenue. I guess the reason you didn't deduct them in the Wrigley's example is that they are already included in cost of sales?

The company I am working on breaks out R&D as a seperate item, so I deduct that on the defensive statement, and then after I depreciate it, I deduct it again on the enterprising statement.

I think this is right?

Thanks for your help, Mr Heiserman.
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