Below the line refers to line items in the income statement that do not directly impact a firm's reported profits. A firm may classify certain expenditures as being capital expenditures, thereby pushing them below the line by shifting them from the income statement to the balance sheet. Or, an expense is charged against a reserve account rather than being charged directly to expense. For example, a bad debt may be charged against the allowance for doubtful accounts, so that a specific bad debt does not appear on the income statement.
Publicly held firms may attempt to recharacterize some of the expenses in their income statements as being below the line, attempting to convince investors that the underlying operations of the firm are performing better than the total reported profits (or loss) of the organization. Doing so results in non-GAAP earnings, for which the SEC has specific reporting requirements.
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.