ABSTRACT
This paper gives a review of some basic accounting concepts designed to provide an engineer sufficient background to understand DD&A – depreciation, depletion and amortization, and its impact on a company's financials. Examples are provided to
demonstrate how different investments generate different amounts of DD&A expense and how this, in turn, affects a company's cash flow and net income. DD&A and its effect on a company's financial books is often a mysterious and misunderstood area for engineers. However, many engineers find themselves in management positions where they need to understand DD&A and how it affects net income – an obvious financial index on which stockholders and analysts focus. Should investment decisions be driven by DD&A considerations? The answer is "maybe" – it depends on the situation.
