One-Time Item

One-Time Item

A one-time item is a gain, loss or expense on the income statement which is not of a recurring nature and which is therefore not considered to be part of the ordinary business activities of a business. To get an accurate measure of a company’s operating performance, point items are usually excluded by analysts and investors when evaluating a company. Punctual elements most often affect results, but can sometimes have a positive impact.

Decomposition of a single element

One-off items are recognized as operating expenses or below the EBIT line and then identified by management as “one-off” in their analysis of financial results or additional documents for investors. The one-off items in the income statement can be explained on their own or would be discussed by the company in a similar manner to that described above.

It is important to report specific items separately to ensure the transparency of financial information. The point elements are exactly that – management does not expect them to happen again – so the explicit separation of these elements in the income statement or in a management discussion allows for a better assessment of the generation capacity continuous business income. Management will point out specific things, but whether an analyst or an investor thinks they are really punctual and not, perhaps, from time to time is a different matter.

Unique items may include:

  • restructuring costs

  • impairment or write-off of assets
  • Loss of discontinued operations
  • loss related to early repayment of debt
  • Merger-acquisition or disposal costs
  • gain or loss from sale of assets
  • extraordinary legal fees
  • costs of damage caused by a natural disaster
  • expense resulting from a change in accounting policy

The treatment of punctual elements has several implications related to the analysis of the performance of the company and the valuation of its shares, credit agreements and executive compensation plans. An analyst should make adjustments to the income statement to produce a “net” look at EBIT, EBITDA and the figures for net income on which to calculate price multiples. Debt agreements should specify the exclusions relating to the calculation of certain restrictive covenants. Executive compensation plans should also explain how one-off items are treated in compensation formulas.

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