Above the line definition
/What is Above the Line?
Above the line refers to all revenue generated and expenses incurred by a business that have a direct impact on reported profits. In effect, the term includes all activity reported on an organization's income statement. The term does not refer to other activity that only impacts the financing or cash flows of the business. For example, the receipt of funds from the sale of company stock is not considered to be above the line. Conversely, the sale of goods and the associated cost of goods sold are considered to be above the line.
A different interpretation of the concept is that "above the line" refers to the gross margin earned by a business. Under this interpretation, revenues and the cost of goods sold are considered to be above the line, while all other expenses (including operating expenses, interest expense and taxes) are considered to be below the line.
The Difference Between Above the Line and Below the Line Expenses
Expenses considered to be unrelated to the ongoing operations of a business are considered to be below the line. Above the line expenses are more likely to be recurring in nature, while below the line expenses are more likely to be non-recurring (unusual). Also, above the line expenses are related to the operations of a business, while below the line expenses are more likely to be associated with loss events, taxes, or financial transactions.