Ongoing
operations –
Should include all revenue & costs associated with
core operations and exclude revenues & costs from other parts other business (e.g. unrealized gains/losses from hedging
activities, financing costs, M&A exp,
litigation settlements)
Example - Retail chains may buy & sell real estate,
but that’s not the main business.
Neither is running a pension
fund.
Why we
need Core Earnings –
The importance of earnings as indicators in the
marketplace and corresponding concern in the investor community over the comparability and usability of current
earnings is how the concept of Core
Earnings came about.
In the last few years the reliability of earnings
reports has dramatically decreased.
As Standard & Poor's business is based on providing
investors with reliable information, analysis and advice, it believes it is time for the investment community at large
to take corrective action.
Accordingly, Standard & Poor's feels that earnings
reports must be understandable, consistent and
transparent.