Operating Expense data in Compustat databases

Recently I got a question on Operating Expense data as it is available in Compustat databases. Operating Expense is “is an ongoing cost for running a product, business, or system . . . In business, an operating expense is a day-to-day expense such as sales and administration, or research & development, as opposed to production, costs, and pricing. It is the money the business spends in order to turn inventory into throughput. On an income statement, “operating expenses” is the sum of a business’s operating expenses for a period of time, such as a month or year.” See also WIkipedia.

In Compustat databases the variable Operating Expense is usually is an aggregate of several items of the income statement. Not all individual parts are reported also in separate variables, though. If you need to know which items have been included in the Operating Expense item you can download the Income Statement Model Number (ISMOD) with your data. The 2-character numeric code that you get indicates how the Operating Expense is reported according to internationally accepted formats. Details taken from the Compustat Online Manual:

Compustat (Global) has four Income Statement models (formats) for industrial companies. These models represent the most common methods an international industrial company may use to present data, and some models are more commonly used in some countries than others. This enables you to see trends within countries so you can use a particular model of presentation. To illustrate, most U.S. companies use the Cost of Sales format (Income Statement Model 1), while German companies use the Purchase or Production format (Income Statement Model 2), and most Hong Kong companies do not break-out their Expense components on their Income Statements (Income Statement Model 3). The models do not represent particular countries but do represent represent different but internationally accepted formats for reporting the Operating Expense.
The model may apply to one or more company-level items. The following table lists Income Statement Model Number codes and their descriptions:

Income Statement Model Code: 01
Description: Cost of Sales Format
The variable Operating Expense (Total) is a summation of the following 3 items:

  • Cost of Goods Sold (COGS)
  • Selling, General and Administrative Expense (XSGA)
  • Operating Expense (Total) Other (XOPRO)

For Canada & United States the Operating Expense (Total) Other contains a Not Available data code

Income Statement Model Code: 02
Description: Purchase or Production Format
The variable Operating Expense (Total) is a summation of the following items:

  • Raw Materials, Supplies and Merchandise (RAWMSM)
  • Staff Expense (Total) (XSTF)
  • Operating Expense (Other) (XOPRO)


  • Capitalized Costs (CAPCST)
  • Change in Stocks (STKCH)

Income Statement Model Code: 03
Description: Not specified format
Either the components of the Operating Expense (Total) are unclassified or operating expenses are presented as a total with no detailed breakdown.

Income Statement Model Code: 04
Description: Calculated format
Standard & Poor’s calculates a figure for Operating Expense from available information, but components contain a Not Available (NA) data code.

Income Statement Model Code: 05
Description: Hybrid Format
Company does not report operating revenues or expenses, but does include operating income on the Income Statement. Standard & Poor’s uses the Hybrid model for interim data due to more limited breakouts during interim periods. When the Income Statement Model Number is 05, all items in Income Statement Model Numbers 01 and 02 may be used.