Module I· PP&E, Capex & D&ABasic
Question
What are depreciation and amortization (D&A) — and the difference?
Answer
| Depreciation | Amortization | |
|---|---|---|
| What | Tangible assets (PP&E) | Intangibles (software, patents, brands) |
| Trigger | Usage + time | Contract term |
Standard methods
- Straight-line (standard under local GAAP + IFRS): same annual rate
- Declining-balance (local GAAP, for tax optimization)
- Units-of-production (rare)
IB modeling
D&A shown together — both non-cash, treated the same in the cash flow statement.
Pitch tip
D&A/sales: industrials 4-8%, tech 1-3%, capital-intensive 10-20%.