Operating Income (SF.IS.OpIncome)

Operating Income (SF.IS.OpIncome) refers to the total revenues from all of a company’s operating activities, after deducting any sales adjustments and excise taxes, reduced by total expenses that are operating in nature, such as variable costs which is directly related to the volume of sales, indirect operating costs, depreciation or amortization, operating provisions and other expenses which are incurred from operating activities. Operating income is generally referred to as earnings before interest and taxes (EBIT).

Operating Income (SF.IS.OpIncome) is calculated for Industrial, Utility and Insurance companies, as :

Depending on the Income statement format, Operating Income (SF.IS.OpIncome) includes the following:

  • In the functional method (cost by function), or the cost summary method (cost by type, cost by nature), Operating Income (SF.IS.OpIncome) refers to all items presented as revenues, reduced by net operating expenses, reported above the operating profit.
  • In the single-step method (total income/total expense), Operating Income (SF.IS.OpIncome) refers to the portion of total income that is operating in nature, reduced by the portion of total expenses that are operating in nature, such as costs that are directly related to the volume of sales, fixed costs related to operating activities, depreciation and amortization, operating provisions, and other expenses incurred from operating activities. Operating Income (SF.IS.OpIncome) excludes the portion of income and costs which is classified as non-operating in nature.

For companies reporting in the single-step income statement format, the following items are treated as operating and non-operating:

  • Income classified as operating in nature, updated in the revenue section, includes:
    • Gross sales, reduces by sales allowances and excise taxes
    • Written premiums, adjusted by the value of unearned premiums and premiums ceded – for insurance companies
    • Net investment income or losses which form part of a company’s core operations or investment activities
    • Other income arising from operating activities
  • Income classified as operating in nature, updated in the operating expense section, includes non- recurring/one-off/unusual gains (other than gains on the sale of fixed assets) – such as a reversal of impairment charges, the recognition of negative goodwill, or other non-recurring income.
  • Income classified as non-operating in nature, updated in the non-operating section, includes:
    • Gain on the sale of fixed assets
    • Equity in the earnings of affiliates, associates or joint ventures
    • Net investment income or losses which do not form part of a company’s core operations or investment activities
    • Other non-operating income or net non-operating income

Costs classified as operating in nature, updated in the operating expense section, include:

  • Variable production costs directly related to the volume of sales
  • General, selling and administrative expenses
  • Depreciation and amortization
  • Amortization of deferred expenses capitalized on the balance sheet, other than deferred financial expenses
  • Interest costs or net interest costs, arising from operating activities
  • Changes in operating provisions
  • Non-recurring/one-off/unusual charges (other than a loss on the sale of fixed assets) – such as impairment charges, revaluation of assets, restructuring costs, non-recurring litigation charges or other non-recurring losses
  • Revaluation of biological assets
  • Fees payable by externally managed investment companies
  • Any other expenses related to operating activities

Costs classified as non-operating in nature, updated in the non-operating section, include:

  • Non-recurring/one-off loss on the sale of fixed assets
  • Amortization of deferred financial expenses capitalized on the balance sheet
  • Interest costs or net interest costs, arising from non-operating activities
  • Net investment losses which do not form part of a company’s core operations or investment activities
  • Other non-operating expenses or net non-operating expenses