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Hello,
I am having trouble relating the “Summary vs. Detailed Income Statements (Review)” video with the given income statements.
On the Industrial-Summary Income Statement, we are given Reimbursable Operating Expenses and Non-Reimbursable Operating Expenses. When going through the labeling process, do we separate the two? Is it up to our judgement to decide what is reimbursable vs non-reimbursable?
On the Gully Logistics Annual Statement, there is also no vacancy.
Just want to make sure I have it down before I take the quiz.
Thank you,
On the Industrial-Summary Income Statement, we are given Reimbursable Operating Expenses and Non-Reimbursable Operating Expenses. When going through the labeling process, do we separate the two? Is it up to our judgement to decide what is reimbursable vs non-reimbursable?
Yes, it is helpful to separate the two, although not always necessary (or even possible). Every detailed statement you see in the industry will differ. Some firms will be more thorough in detailing what is a reimbursable expense, and what is not.
In the case of the Gully Logistics Annual Statement, you’ll note that a line item called ‘Non-Recoverable – Utilities’. I would assume that that is the only non-reimbursable operating expense line item, and that all other line items are reimbursable.
Note that reimbursable does not necessarily mean the amount was actually reimbursed. When a reimbursable operating expense is not actually reimbursed, we call that slippage. Slippage can occur on account of vacancy, poor management, timing of the expense vs reimbursable, and others.
On the Gully Logistics Annual Statement, there is also no vacancy
It’s not atypical for a detailed income statement to not show actual vacancy. We can make an educated guess, based on the detailed income statement, that occupancy increased from 2017 to 2019. We can also make an educated guess that the property was nearly fully occupied.
But both are simply educated guesses, and we would thus need to request a record of actual occupancy by month over those years.
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