[noggin]

I'm not sure I understand your question completely, but as far as I'm aware Kodi does not encode anything. If it detects a format that your amplifier can accept then that will be passed through to the amplifier, Everything else it decodes and then sends uncompressed (LPCM) to the amplifier.

If your amplifier is weird and doesn't support LPCM at all, then I'm afraid you're out of luck.

Actually Kodi does have a Dolby Digital encoder in it. This allows AAC, FLAC etc. multichannel audio files to be played on devices that only support SPDIF bandwith audio and can thus only bitstream DD or DTS and PCM 2.0. Without the Dolby Digital encode/transcode option SPDIF Toslink/Coax amps would only be able to play multichannel FLAC, AAC etc. stuff in PCM 2.0. The option also allows playback of DTS content on systems that don't support DTS and only support Dolby (not many of those around - but there are a few I believe)

I believe it will also allow E-AC3 (aka DD+) 5.1 content to be transcoded to DD 5.1.

(The option appears under DD/AC3 passthrough if you have your audio output configured for 2.0 - unless this option is platform specific?)

This option has renewed popularity for Live TV now too - since passthrough is no longer supported for Live TV, and instead PCM decode is used. If you don't have a 5.1 PCM solution, and only have Toslink / Coax SPDIF, previously you got 5.1 DD bitstreamed if you watched a 5.1 DD TV show. Now you get 5.1 PCM or 2.0 PCM if you have only got SPDIF quality connectivity UNLESS you enable Dolby Transcode, where the 5.1 Dolby Digital is decoded and then recoded back to DD 5.1...

Huh. Interesting. So in what cases will kodi send LPCM and in what cases will it encode to DD?

You will get PCM output for mono and stereo sources, and then anything >2.0 (i.e, multichanne) will be re-encoded as Dolby Digital multichannel.

It's a simple solution for people who only have SPDIF Toslink/Coax digital audio paths (or HDMI paths limited to the same level) and don't have support for multichannel PCM output or bitstreaming of HD Audio (or in some cases DTS). This is true for people with legacy AVRs without HDMI, people who watch via their TV using ARC, people who have Kodi hardware that doesn't support HD Audio/PCM Multichannel etc.

It's a great solution for them - as they retain the ability to listen to multichannel AAC, FLAC (and DTS if they don't have DTS compatible gear). It's now even more important for Live TV - as DD passthrough has been disable for Live TV in recent Kodi builds, so if you only have a SPDIF-level set-up, you either get stereo decode or a DD re-encode.

For what it's worth I strongly prefer kodi not to re-encode everything, since quality loss is inevitable with lossy formats.

Absolutely - but if it's a case of that or not having multichannel audio at all - I'd go with the re-encode. It's a high bitrate DD encode (640k I think), so it won't introduce horrific concatenation artefacts... (If it were 256k 5.1 I'd wince. I had a DVD with that quality encode - and now know what 5.1 AM radio would sound like...)