- CFA Exams
- CFA Level I Exam
- Topic 3. Financial Statement Analysis
- Learning Module 18. Understanding Income Statements
- Subject 4. Non-Recurring Items and Non-Operating Items
CFA Practice Question
Which one of the following is a one-time item that analysts should remove from financial statements to understand normal operations?
B. Restructuring charges
C. Income tax expense
A. Interest expense
B. Restructuring charges
C. Income tax expense
Correct Answer: B
Corporations incur restructuring charges when they make major changes in the business, such as closing plants, laying off employees, and selling different product lines. Most companies expect to incur restructuring charges very infrequently.
User Contributed Comments 5
| User | Comment |
|---|---|
| cfairs | Restructuring charges are part of 'Unusual or infrequent' non-recurring category |
| Vikku | They are NOT part of continuing operations, so reported as a single line item on income statement & appear "above the line (as pre tax)." |
| Shaan23 | In the text it says - Under GAAP - Items that are unusual or infrequent are shown as part of a companies continuing operations. For eg. Restructuring charges such as costs to close plants are considered a part of ordinary activities. Whats going on? |
| gill15 | it just means as an analyst you "should" remove them from income from normal operations, although GAAP allows them. |
| adidasler | think the idea here is that it is not a recurring expense ... so to see how the company normally operates .. you need to take that since it doesnt happen every year |