what is a non cash charge 
a non cash charge is a write down or accounting expense that does not involve a cash payment they can represent meaningful changes to a company s financial standing weighing on earnings without affecting short term capital in any way depreciation amortization depletion stock based compensation and asset impairments are common non cash charges that reduce earnings but not cash flows understanding a non cash chargenon cash charges can be found in a company s income statement charges unaccompanied by a cash outflow must be recorded and are necessary for firms that use accrual basis accounting a system used by companies to record their financial transactions irrespective of whether a cash transfer has been made depreciation amortization and depletion are expensed throughout the useful life of an asset that was paid for in cash at an earlier date if a company s profit did not fully reflect the cash outlay for the asset at that time it must be reflected over a set number of subsequent periods these charges are made against accounts on the balance sheet reducing the value of items in that statement non cash charges can also reflect one time accounting losses that are driven by changing balance sheet items such charges are often the result of changes to accounting policy corporate restructuring the changing market value of assets or updated assumptions on realizable future cash flows general electric co s ge 22 billion write down of the value of its struggling power business in october 2018 referred to as a goodwill impairment charge is a great example of a non recurring non cash charge 1 goodwill is added to the balance sheet when an acquisition exceeds the fair value of the acquired entity and it must be impaired in the future if the value of the acquired assets falls below original expectations ge s big accounting charge mainly linked to its 10 6 billion acquisition of france based alstom understandably raised eyebrows 2 3 special considerationsnon cash charges like other types of write downs reduce reported earnings and as a result can weigh on share prices companies often seek to play down the significance of non cash charges particularly one off ones adjusting earnings to exclude their impact from financial figures investors are tasked with determining whether non cash charges are a cause for alarm non cash expenses are often pre flagged and harmless however some may appear out the blue and serve as potential red flags of poor accounting mismanagement and a drastic shift in fortunes 