Definition
Exceptional Items
Exceptional items are large, unusual or non-recurring gains and losses disclosed separately in the income statement so they do not distort the underlying performance.
Items such as asset-sale gains, restructuring costs, impairment charges or one-off litigation settlements are shown as exceptional so users can see the recurring operating result clearly. They are part of reported profit but flagged for their non-routine nature.
Because exceptional items can swing reported PAT sharply, analysts compute adjusted or normalised earnings by excluding them to gauge sustainable profitability. Companies sometimes label recurring costs as exceptional to flatter core earnings, so the classification deserves scrutiny.
Related terms
- Profit After Tax (PAT)Profit After Tax is a company's net profit remaining after all expenses, interest and taxes have been deducted, the bottom line of the income statement.
- Net MarginNet margin, or net profit margin, is profit after tax as a percentage of revenue, showing how much of each rupee of sales becomes bottom-line profit.
- ImpairmentImpairment is the write-down of an asset's carrying value when its recoverable amount falls below what is recorded on the balance sheet.
- Notes to AccountsNotes to accounts are the detailed disclosures accompanying financial statements that explain accounting policies, breakdowns and items not visible on the face of the statements.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.