Depreciation vs. amortization
Depreciation applies to tangible PP&E under ASC 360[ASC 360]. Amortization applies to intangibles (developed technology, customer relationships, capitalised software) under ASC 350. For FCF purposes the two are typically combined as the "D&A" line.
Why D&A is not a CapEx proxy
- Historical cost basis; replacement now likely costs more after inflation.
- Useful-life elections can stretch or compress the annual charge.
- Acquisition-step-up purchase-accounting amortization has no replacement equivalent.
- Goodwill impairment is non-recurring; it flows through OCF as a one-off when triggered.
Finding D&A in a 10-Q
Cash flow statement, top of the operating section, first reconciling line below net income. The income-statement charge inside cost of revenue or operating expense is the same number; cash flow statement is the cleanest place to read it.