You may notice that in many of our FHR reports, we do not break out the COGS line item in the financials at the back. There are a couple of reasons for this:
- We define COGS to include material costs, direct labor and allocated overhead. At times, we come across statements that leave out some of these items. In order to maintain consistency, we will only enter COGS when we are confident that we have included all three items
- We will also not break out COGS if it includes additional costs such Depreciation and other expenses (or if it is not clear that these are included /excluded)
- For certain industries, where standards on COGS definition are not industry wide, we will not break out COGS
In short, we have to be 100% sure that the COGS number only refers to actual COGS, as we define it above!
COGS is not a required line item to produce an FHR, and the exclusion of COGS does not impact the robustness of the rating