Investor Insight - Motorola had special charges in 14...

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Investor Insight Steven Bronstein/The Image Bank/Getty Images. Many companies incur restructuring charges as they attempt to reduce costs. They often label these  items in the income statement as “non-recurring” charges, to suggest that they are isolated events,  unlikely to occur in future periods. The question for analysts is, are these costs really one-time, “non- recurring events,” or do they reflect problems that the company will be facing for many periods in the  future? If they are one-time events, then they can be largely ignored when trying to predict future  earnings. But some companies report “one-time” restructuring charges over and over again. For example,  Procter and Gamble Co.  reported a restructuring charge in 12 consecutive quarters, and 
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Unformatted text preview: Motorola had special charges in 14 consecutive quarters. On the other hand, other companies have a restructuring charge only once in a five- or ten-year period. There appears to be no substitute for careful analysis of the numbers that comprise net income. If a company takes a large restructuring charge, what is the effect on the company's current income statements versus future ones? Answer: The current period's net income can be greatly diminished by a large restructuring charge. The net incomes in future periods can be enhanced because they are relieved of costs (i.e., depreciation and labor expenses) that would have been charged to them....
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This note was uploaded on 11/08/2011 for the course ACCOUNTING ac 201 taught by Professor - during the Spring '11 term at Montgomery.

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