Understanding Financial Statements

This Indian mother got an Income tax notice of ₹20 lakh for her daughter’s FD. A 61 year old homemaker in India once opened her mailbox to a shock: A tax notice for a ₹20 lakh deposit. (Source: Business Standard) Except she never deposited a rupee. Her daughter had made a joint fixed deposit in her name. What was meant as family convenience turned into a compliance headache. This is more common than you think. India today has more than 2.5 billion bank accounts, and joint FDs are popular in almost every household. Families open them with parents or spouses for: > easy access during emergencies, > safety and convenience, and > succession planning if something happens. It feels like the safest option. But under our tax reporting system (Rule 114E), it can backfire because: - Banks must report all deposits above ₹10 lakh. - Every PAN on a joint FD has to be reported. - Result: The same ₹20 lakh shows up in both holders’ Annual Information Statements. - The system flags it as duplicate income → and a notice gets generated. Now, you can’t fully escape tax notices until CBDT refines AIS rules, but you can protect yourself by staying proactive with these steps: 👉 Always check your AIS before filing returns. 👉 Use the feedback option to mark “belongs to another PAN.” 👉 Maintain proofs like bank statements or gift deeds. 👉 Respond promptly to compliance notices online. If you ignore it, the issue can escalate into: - a demand notice, - penalties, or - reassessment under Section 148A. A small clarification can save you months of hassle. Also, a tax notice isn’t always bad. It’s simply the system asking for proof. If your records are clean, it’s only about providing clarity. Would you still put a parent’s name on an FD after knowing this risk? #IncomeTax #BankAccounts #Deposits

There is a widespread argument that because #informal #economies in lower income countries are so large, they must be a goldmine for raising more #taxes. But this argument is misleading - is it is based on a common misunderstanding of the underlying statistics, tax handles, and income distributions within informal sectors. Still, it has caused states to double down on inefficient and inequitable policies. In this short policy brief for the International Centre for Tax and Development, I lay out the main issues with this argument, and the facts that we need to recognise in order to develop a better approach. Such an approach would rely on targeting higher-income earners and untaxed wealth, a more developmental engagement with informal sectors, better data collection and dialogue with informal actors. This is a policy brief drawing on a wide range of work and collaborations with colleagues both at the ICTD and WIEGO - Women in Informal Employment: Globalizing and Organizing, particularly Mike Rogan Vanessa van den Boogaard and Nana Akua Anyidoho. If against all odds someone reads this and would actually like to read more about the statistics and measurement part of it, I've got a longer version of that argument coming out in International Labour Review soon, happy to share an early version via message.

OPEX vs CAPEX OPEX (Operating Expenses) vs. CAPEX (Capital Expenditures) 1. Definition: • OPEX (Operating Expenses): Ongoing costs incurred during regular business operations to maintain the day-to-day functioning of the company. • CAPEX (Capital Expenditures): Expenditures made to acquire, upgrade, or maintain physical assets like property, equipment, or technology, which are expected to provide long-term benefits. 2. Examples: • OPEX: • Rent • Salaries and wages • Utilities • Office supplies • Marketing expenses • Insurance • Maintenance costs • CAPEX: • Purchase of machinery, buildings, or land • Equipment upgrades or replacements • Software development costs • Vehicle purchases • Construction of new facilities 3. Accounting Treatment: • OPEX: Deducted as expenses in the income statement in the period they are incurred. • CAPEX: Capitalized as an asset on the balance sheet and depreciated/amortized over time. 4. Impact on Cash Flow: • OPEX: Impacts short-term cash flow immediately, as it is an ongoing expense. • CAPEX: Spreads the financial impact over multiple years due to depreciation or amortization. 5. Tax Implications: • OPEX: Typically tax-deductible in the year they are incurred. • CAPEX: Depreciated over several years, and the tax benefits are spread out over the asset’s useful life. 6. Financial Reporting: • OPEX: Reflected in the income statement, directly impacting operating profit. • CAPEX: Initially recorded on the balance sheet as assets and then gradually expensed via depreciation/amortization. 7. Impact on Profitability: • OPEX: A higher OPEX reduces the net income and profitability in the short run. • CAPEX: Does not immediately affect the income statement but can increase profitability in the long term through improved efficiency or capacity. 8. Flexibility: • OPEX: Generally more flexible, as businesses can adjust or scale back operating expenses as needed. • CAPEX: Less flexible, as it involves a significant investment in long-term assets. 9. Examples in Different Sectors: • OPEX: • In tech: Cloud hosting fees, software subscriptions • In manufacturing: Wages for factory workers, utility bills for machines • CAPEX: • In tech: Purchasing servers, building data centers • In manufacturing: Buying new production lines or factories 10. Risk and Reward: • OPEX: Lower risk due to predictable costs, but may hinder profitability if not managed well. • CAPEX: Higher risk, as the investments might not always yield the expected returns, but can lead to substantial rewards (e.g., increased capacity, competitive edge). Conclusion: • OPEX is essential for day-to-day operations and can be adjusted quickly, but impacts profitability directly in the short term. • CAPEX is a long-term investment in the company’s future, requiring careful planning and significant financial commitment. While it does not impact profits immediately, it can lead to greater returns over time

This is what a capex and depreciation waterfall looks like. If you don't have a capex plan in your business model and forecasts, you're overlooking one of the biggest expenditures and cash outlays. 𝐓𝐰𝐨 𝐝𝐞𝐟𝐢𝐧𝐢𝐭𝐢𝐨𝐧𝐬 𝐭𝐡𝐚𝐭 𝐦𝐚𝐭𝐭𝐞𝐫: 𝑪𝒂𝒑𝒆𝒙 Capital Expenditure, or capex, refers to the funds a company spends to acquire or upgrade physical assets like property, machinery, or technology (commonly referred to a PP&E). These are long-term investments that enable a company to maintain or grow its operations. Without them, most companies would fail. 𝑫𝒆𝒑𝒓𝒆𝒄𝒊𝒂𝒕𝒊𝒐𝒏 Depreciation is the gradual reduction in the value of an asset over the coming years. In accounting, we allocate the cost of PP&E over its useful life. At the end of its life, the value is low and we often say the asset is fully depreciated. 𝐖𝐡𝐲 𝐩𝐮𝐭 𝐭𝐨𝐠𝐞𝐭𝐡𝐞𝐫 𝐚 𝐜𝐚𝐩𝐞𝐱 𝐟𝐨𝐫𝐞𝐜𝐚𝐬𝐭 𝐚𝐧𝐝 𝐝𝐞𝐩𝐫𝐞𝐜𝐢𝐚𝐭𝐢𝐨𝐧 𝐰𝐚𝐭𝐞𝐫𝐟𝐚𝐥𝐥? A capex forecast shows the amount of money a company plans to spend on capital assets, or PP&E, over a specific period. ➊ Cash flow management: Knowing the amounts and timing of capex helps to manage cash flows and ensure big cash outlays don't put the company in a liquidity situation. ➋ Strategic planning: Capex is essential for growth in many companies. Planning aligns major capital projects with long-term goals and strategies. 𝐖𝐡𝐚𝐭 𝐝𝐨 𝐲𝐨𝐮 𝐬𝐞𝐞 𝐡𝐞𝐫𝐞? There are two capex plans with depreciation waterfalls. Capex is identical in each instance: Year 1: $100,000 Year 2: $150,000 Year 3: $200,000 Year 4: $200,000 Depreciation in Example 1: capex life of 5 years. Depreciation in Example 2: capex life of 10 years. Depreciation expense with 5 year depreciation = $355,000 Depreciation expense with 10 year depreciation = $177,500 𝐖𝐡𝐚𝐭'𝐬 𝐭𝐡𝐞 𝐩𝐨𝐢𝐧𝐭 𝐨𝐟 𝐩𝐥𝐚𝐧𝐧𝐢𝐧𝐠 𝐚𝐧𝐝 𝐚𝐧𝐚𝐥𝐲𝐬𝐢𝐬? A 5-year depreciable life accelerates the financial benefits of a reduction in taxable income. In this case, the company realizes an additional $177.5K in depreciation expense. A 10-year life spreads out the benefits and may improve short-term profitability. The choice between the two should be based on a company's specific financial goals, cash flow needs, tax planning, and the nature of the assets in question. This FP&A planning methodology lets you set an array of assumptions for capex and allows for easy toggling of: ▪ salvage value ▪ depreciable life ▪ depreciation method ▪ capex timing --------------------- ✳ #seidmanfinancial for daily insights on FP&A, accounting, Fractional CFO, management consulting, and business modeling. ✴ 𝘛𝘩𝘦𝘳𝘦'𝘴 𝘢 𝘭𝘰𝘵 𝘵𝘰 𝘶𝘯𝘱𝘢𝘤𝘬 𝘩𝘦𝘳𝘦 — 𝘸𝘩𝘢𝘵 𝘲𝘶𝘦𝘴𝘵𝘪𝘰𝘯𝘴 𝘥𝘰 𝘺𝘰𝘶 𝘩𝘢𝘷𝘦? 𝘞𝘩𝘢𝘵 𝘦𝘭𝘴𝘦 𝘥𝘰 𝘺𝘰𝘶 𝘰𝘣𝘴𝘦𝘳𝘷𝘦?

Capital expenditure (CAPEX) is more than just a number - it’s often the foundation of any techno-economic analysis. We use a top-down approach to estimating CAPEX for the established technologies, as these figures are well-validated. However, estimating CAPEX for low-TRL processes can be challenging. In this case, we need to use the bottom-up approach to estimating CAPEX, often building on literature correlations for specific pieces of equipment. If you developed a new device or piece of equipment for which such correlations don't exist, you're likely to use a similar piece of equipment as a proxy - this is one of the key issues and sources of uncertainty. What challenges have you faced in CAPEX estimation? #TechnoEconomicAssessment #CAPEX #Innovation #Decarbonization #Sustainability P.S. Attached is the overview of correlations for a broad range of unit operations from the ASSESSCCUS project.

Recently, I’ve seen several crypto tax articles and blog posts circulating about the new Form 1099-DA, and unfortunately, some of them contain incorrect or incomplete information. This isn’t surprising. The IRS’s digital asset reporting rules are brand new, highly technical, and still being phased in. But misinformation, even from people who call themselves “crypto tax experts”, can easily lead investors down the wrong path. Here’s the truth: - For 2025, brokers are required to report gross proceeds, but not cost basis, from digital asset sales. - The wallet-by-wallet cost basis method becomes mandatory starting January 1, 2025, under Rev. Proc. 2024-28. - The final regulations do not require decentralized exchanges or non-custodial platforms to issue 1099-DAs (at least not yet). The facts matter. If you base your tax compliance or planning on inaccurate online summaries, you could easily overstate gains, miss income, or trigger an IRS notice. 👉 Always verify crypto tax information directly from official IRS sources and work with crypto tax professionals who actually read and interpret the regulations, not just repost headlines. Crypto taxation is evolving quickly. Staying compliant isn’t about who sounds confident online — it’s about who understands the rules well enough to explain them clearly, correctly, and responsibly. If you’re unsure what Form 1099-DA means for you or how to prepare for the 2025 tax filing, feel free to reach out! #Form1099DA #CryptoTaxCPA #DigitalAssetReporting #WalletByWallet #RevProc202428 #IRSRegulations #CryptoCompliance #TaxCompliance

I still see people whiff this part of the budget all the time... (please tell me you won't miss it this year 🤞). My favorite part about the budgeting process: It's late October 🎃... Revenue and EBITDA look good, you're about to hit submit, and then from the shadows someone yells, "𝙬𝙖𝙞𝙩, 𝙬𝙝𝙖𝙩 𝙖𝙗𝙤𝙪𝙩 𝙘𝙖𝙥𝙚𝙭?" Everyone looks around and then the "ohhh whoops" feeling sets in. We forgot capex. 𝘊𝘰𝘮𝘱𝘭𝘦𝘵𝘦𝘭𝘺. Why? It's not part of the P&L so it often gets overlooked until the end. The truth is -- Capital Expenditures or "𝗖𝗮𝗽𝗲𝘅" 𝗶𝘀 𝗶𝘁𝘀 𝗼𝘄𝗻 𝘀𝗲𝗽𝗮𝗿𝗮𝘁𝗲 𝗯𝘂𝗱𝗴𝗲𝘁. It just happens to hit the Balance Sheet instead of the P&L. There's good news, however -- it's actually a fairly easy process. But first, what is "capex"? Capex is cash we 𝘀𝗽𝗲𝗻𝗱 𝘁𝗼𝗱𝗮𝘆 (to acquire an asset) that benefits us 𝗶𝗻 𝘁𝗵𝗲 𝗳𝘂𝘁𝘂𝗿𝗲. We depreciate the 𝗰𝗼𝘀𝘁 in the future to satisfy the "Matching Principle." Why depreciate? If I buy a delivery truck, that truck will help me generate Revenue over the next ~8 years or so (by making deliveries). So, I need to "match" its cost against the Revenue it helps me generate. With that in mind, here's how we can build it: Look at the image below... I've got two identical sections that do slightly different things. The first is the "capex" section, and this is where I list the project and its cost. So for the first entry, I'm saying, "I'd like to buy a $75,000 truck in Feb. of 2027 and I think it will last me 8 years (the "useful life")." And you can see over to the right the 𝗰𝗮𝘀𝗵 𝗶𝗺𝗽𝗮𝗰𝘁 -- $75,000 goes out in Feb. of 2027. Now, the second section: You can see that same new truck is listed at the top, but over to the right it's different... In Feb. 2027 you see $781 that continues monthly. That is the 𝗱𝗲𝗽𝗿𝗲𝗰𝗶𝗮𝘁𝗶𝗼𝗻 = $75,000 / 8 years / 12 months = $781 per month. Effectively, the depreciation makes an accounting adjustment to my cash cost so that the expense of the asset 𝙢𝙖𝙩𝙘𝙝𝙚𝙨 the Revenue it helps create. From there, it's a link-up to my Three Statement Model: ✓ (1) Capex links to the Fixed Asset account like this: Prior Period balance 𝘱𝘭𝘶𝘴 the new Capex (if done correctly, I should see the $75,000 in the Cash Flow Statement) ✓ (2) Depreciation links to my Income Statement, and; ✓ (3) it gets captured on my Balance Sheet in Accumulated Depreciation: Prior Period balance 𝘱𝘭𝘶𝘴 the new Depreciation (if done correctly, this will zero out any "cash impact" of Depreciation in my Cash Flow Statement) The net impact of it all? Cash out the door today, but with the correct accounting treatment depreciating the cost in the future 👍 Hope this helps 🙂. 𝗘𝘅𝘁𝗿𝗮 𝗿𝗲𝘀𝗼𝘂𝗿𝗰𝗲𝘀... 📥 Download 𝗰𝗮𝗽𝗲𝘅 𝘁𝗲𝗺𝗽𝗹𝗮𝘁𝗲 👉 https://lnkd.in/e75jhi3d 🧠 Take a modeling 𝗾𝘂𝗶𝘇 👉 https://lnkd.in/eccYpT-R 🎓 Master 𝟯 𝗦𝘁𝗺𝘁𝘀 & 𝗖𝗮𝘀𝗵 𝗙𝗹𝗼𝘄 👉 https://bit.ly/FMECourses

📉 Telecom CAPEX Drops as 5G Rollout Concludes In Omdia latest Telco capex analysis, the notice a strong decline in capital expenditures in 2023, driven primarily by the completion of major 5G rollouts by leading telcos. The industry's CAPEX fell by 7% year-over-year, reaching $330 billion. Despite a modest revenue growth of 1%, the capital intensity ratio dropped to 16.5%, reflecting a broader trend of reduced investment in network infrastructure. Key players like Verizon and Deutsche Telekom significantly reduced their CAPEX as they wrapped up large-scale 5G deployments. In contrast, companies such as Comcast, NTT DOCOMO, and China Telecom increased their investments, but mainly in non-mobile segments like cloud computing, digitalization, and real estate. As the Telco industry shifts focus from 5G expansion to optimizing and monetizing these networks, CAPEX is expected to stabilize at lower levels. Operators will likely prioritize investments in new growth areas such as AI, cloud services, and industrial digitalization, setting the stage for the next phase of technological evolution. Of course, saying that 5G rollout has concluded is an overstatement. But it is clearly that we have at least close this first phase of implementation for most markets. https://lnkd.in/g7ujeW_t

CAPEX vs OPEX vs EBITDA 1️⃣ CAPEX – Capital Expenditure •What it is: Money spent to buy or upgrade long-term assets. •Examples: Buying equipment or machines Buildings & labs IT systems, ERP Major renovations •Accounting treatment: Capitalized on the Balance Sheet Expensed gradually via Depreciation ✅ Long-term benefit ❌ High upfront cash outflow 2️⃣ OPEX – Operating Expenditure •What it is: Day-to-day costs to run the business. •Examples: Salaries & wages Rent & utilities Consumables & reagents Marketing & maintenance •Accounting treatment: Recorded directly in Income Statement Fully expensed in the same period ✅ Flexible & predictable ❌ Impacts profit immediately 3️⃣ EBITDA – Earnings Before Interest, Taxes, Depreciation & Amortization •What it is: A profitability indicator that shows operating performance before financial and accounting effects. •Formula: > EBITDA = Net Profit + Interest + Taxes + Depreciation + Amortization •Why it’s important: Compares operational performance across companies Used by investors & lenders Shows cash-like operating strength ✅ Good for comparison ❌ Not actual cash flow 🧠 Simple Business Example Buy lab analyzer → CAPEX Staff salaries & reagents → OPEX Operating profit before financing & depreciation → EBITDA

Clearing the Air on Withholding Tax (WHT) in Nigeria: Common Misconceptions and Facts Withholding Tax (WHT) in Nigeria is often misunderstood, leading to non-compliance or overpayments. Let’s address some key misconceptions and set the record straight: 🔍 What is Withholding Tax? WHT is an advance payment of income tax deducted at source and remitted to the tax authority. It is credited against your final income tax liability when you file your annual tax returns. 🚫 Misconception 1: WHT is not charged because there was no VAT on the invoice. ✅ Correction: WHT and VAT are independent taxes. The absence of VAT on an invoice does not exempt the transaction from WHT if it qualifies under the applicable tax laws. For instance, professional or contract services are subject to WHT, whether or not VAT is charged. 🚫 Misconception 2: WHT is charged at a flat rate of 5%. ✅ Correction: WHT rates vary depending on the nature of the transaction. For example, consultancy services attract 10%, while contract services attract 5%. Always confirm the applicable rate for each transaction type. 🚫 Misconception 3: WHT is not charged on intercompany transactions. ✅ Correction: WHT applies to intercompany transactions if the transactions fall under taxable categories such as contract services, consultancy, or supplies. The fact that both entities are within the same group does not exempt the transaction from WHT obligations. Proper documentation and compliance are required. 🚫 Misconception 4: WHT is charged on goods bought for resale. ✅ Correction: WHT is not applicable to goods purchased for resale. It is typically charged on services and transactions involving contract work, consultancy, or supplies that fall outside the resale context. 🚫 Misconception 5: WHT is grossed up and included as part of the cost of the item. ✅ Correction: WHT should not be added to the cost of goods or services. It is an advance tax payment borne by the supplier, deducted at source by the buyer. If you are the supplier, account for WHT as a tax credit in your financial records rather than inflating the cost of your goods or services. 💡 Key Takeaways: ✅ WHT is a tax credit, not the final tax. ✅ Always apply the correct rate based on transaction type and the entity involved. ✅ Proper documentation ensures accurate reconciliation during annual tax filing. ✅ Intercompany transactions are not exempt from WHT if they involve taxable services or supplies. Understanding these nuances can save your organization from compliance issues and overpayments. How does your organization manage WHT calculations and reconciliations? Share your experiences in the comments!