Above the Line

Above the Line refers to all revenue generated and expenses incurred by a business that have a direct impact on reported profits. In effect, the term includes all activity reported on an organization's income statement. The term does not refer to other activity that only impacts the financing or cash flows of the business. For example, the receipt of funds from the sale of company stock is not considered to be above the line. Conversely, the sale of goods and the associated cost of goods sold are considered to be above the line. A different interpretation of the concept is that "above the line" refers to the gross margin earned by a business. Under this interpretation, revenues and the cost of goods sold are considered to be above the line, while all other expenses (including operating expenses, interest and taxes) are considered to be below the line.

Example of Above-the-Line Costs As an example, Nike Inc. reported $39.1 billion in sales in its fiscal year 2019. Gross profits were $17.5 billion. Therefore, Nike's above-the-line costs for the quarter were $21.6 billion, which the company labels cost of sales on its income statement