Jonathan Weil

I think the potential of agentic is to rethink how work gets done overall.

It challenges all sorts of traditional orthodoxies around how organizations execute the work at hand.

Depreciation is the expense that companies report as part of their earnings when they go out and...

build huge plants, or they go out and buy lots of equipment, whether it's semiconductor chips, and they don't immediately expense the cost.

On their income statement of buying that, they put it on their books as an asset, and then they try to estimate how long that plant or how long that equipment is going to last.

And then they gradually write down the cost of that over time.

And the problem...

For investors is that these depreciation expenses, which are going to be ballooning in the next several years, you can't see how much gets sprinkled into cost of revenue or how much gets sprinkled into R&D or sales and general administrative expenses or other categories of operating expenses.

You can find a disclosure that tells you what the total depreciation expense is.

You can find that either elsewhere in the financial statements, whether in a footnote, sometimes on the cash flow statement.

But where investors really need to be able to see it so they can project out how big the depreciation expenses are going to be and also how it affects all those other categories, they need to see how it's allocated across the income statement.

This is actually a common problem widely among lots of industries, but there are exceptions where they will show you expressly on the income statement what depreciation expense is.

One example is railroads, a classic asset-heavy industry.

They will tell you that a depreciation expense on the face of the income statement

And the real service that they're doing there is that you know then that all their other categories of operating expenses don't have depreciation expense buried inside of them.

The board that sets generally accepted accounting principles in 2024 approved a new set of rule changes.

And what they'll require is that all those different types of expense categories on the income statement will have to be broken out somewhere in the financial statements into five different categories.

And that disaggregation will be helpful to understand

what the depreciation cycles for these investments are like and the effect they have on earnings.

The problem for investors who want this information now because capital expenditures are exploding now is that those rules won't take effect for most companies until financial statements that they file in 2028 for the year before.