Non operating expenses refer to those expenses which are made by the company but they are not directly related with the smooth running of business and hence they are called as non operating expenses. As an individual one can compare it with expenses which one has to pay to school for his or her children, in individual case school fees is like operating expenses because without paying school fees your children will be not be able to go to school and expenses paid for going to school picnic is non operating expenses because it is not compulsory to go to picnic in order to study in school. From company point of view of let’s look at some of the examples or list of non operating expenses –
- Salary paid to security guard or watchman for safeguarding of factory building or office premises
- Insurance amount paid to the insurance company for covering of various types of loss arising from the different set of events like theft, fire, earthquake, flood etc…
- Companies which are dealing in international markets, currency loss or exchange loss is another form of non operating expense, this type of loss happens when currency fluctuates widely and unfavorably for the company and hence leading to currency loss.
- Interest which the company pays on loan is another example of non operating expense because if company had not taken loan and used its own source of capital and if one ignores opportunity cost of capital then interest payment is unnecessary expenditure. Hence interest payment is considered as non operating expenditure as it does not help in increasing the production of goods manufactured by the company.
- Loss on the sale of company properties including securities because majority of companies has investments in other companies in the way of fixed deposits with them or equity investment and many times company has to sell those investments at loss resulting in expense for the company and hence loss on sale of investments is another example of non operating expense.
Apart from above many other expenses can be categorized as non operating expense depending on the industry in which the company is operating and also policy of the company as categorization of expense as non operating is a tricky task as same expense can operating expense for one company and non operating for other.