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Ongoing operations –
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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)
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Example - Retail chains may
buy & sell real estate, but that’s not the main business. Neither is running a pension fund.
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Why we need Core Earnings –
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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.
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In the last few years the
reliability of earnings reports has dramatically decreased.
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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.
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Accordingly, Standard &
Poor's feels that earnings reports must be understandable, consistent and
transparent.
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