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As indicated in Figure FSP 3-1, S-X 5-03 requires registrants to separately identify certain operating expense line items if they are material. In practice, many reporting entities will separately identify selling, general, and administrative costs (SG&A) as a single line item, but other operating costs may be separately identified in a manner that differs from the named line items prescribed by S-X 5-03. This section discusses many of the common operating expenses that reporting entities may separately identify in the income statement. This assessment will depend on materiality, and what is deemed to be most useful to a reporting entity’s financial statement users.
The SG&A line item frequently includes the sum of all direct and indirect selling expenses, as well as all general and administrative expenses of the reporting entity. SG&A expenses include salaries of employees (excluding those related to product manufacturing or capitalized labor), depreciation (excluding those related to product manufacturing), bad debt expense, advertising expenses, rent expense (excluding those related to product manufacturing), and any other costs of selling product or administrating the business.

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