All-Inclusive Income Concept

Sometimes companies face expensive one-time charges. This can include things like costs associated with layoffs or a major expansion, or expenses related to a merger or the aftermath of a natural disaster. These one-time events can be positive as well. Say, a one-time tax refund or cash received from selling a subsidiary.

In the all-inclusive income concept, all these one-time events get counted when the company reports it financial results. This might seem like the obvious way to do things, but it can lead to some miscommunications.

A company that closed a merger might report a loss for that quarter due to charges associated with buying the other company. The one-quarter loss might give the knee-jerk appearance that the business faces problems. However, underlying operations remain strong and, in fact, the merger is expected to accelerate growth.

For this reason, many companies provide multiple earnings figures. One will conform to the all-inclusive concept. Another will provide a figure excluding one-time items, allowing investors to judge its underlying business more directly.