What is One-Time Charge?

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A one-time charge, in corporate accounting, is a charge against a company's earnings that the company's managers expect to be an isolated event and is unlikely to occur again. A one-time charge can either be a cash charge against earnings such as the cost of paying severance expenses to laid-off former employees or a non-cash charge such as the writing down of the value of assets such as a piece of real estate whose market value has fallen due to changes in business fundamentals or consumer preferences.Financial analysts routinely exclude one-time charges when they evaluate a company's ongoing earnings potential.

Definition

In corporate accounting, a one-time charge refers to expenses that managers expect to be isolated events and unlikely to recur. These charges can be cash expenses, such as severance payments to laid-off employees, or non-cash expenses, such as asset write-downs due to changes in business fundamentals or consumer preferences.

Origin

The concept of one-time charges originated in corporate accounting practices to more accurately reflect a company's ongoing profitability. Financial analysts typically exclude these infrequent expenses to provide a clearer picture of a company's financial health. As business environments have become more complex, this concept has been widely adopted.

Categories and Features

One-time charges can be categorized into cash and non-cash types. Cash one-time charges include severance payments and legal settlement costs, while non-cash one-time charges include asset impairments and goodwill write-downs. These charges are characterized by their non-recurring nature and short-term impact on financial statements.

Case Studies

For example, in 2018, General Electric (GE) announced a $22 billion goodwill impairment, considered a one-time charge as it reflected a reassessment of the future profitability of its power business. Another example is Boeing's costs related to the grounding of the 737 MAX aircraft in 2019, which were treated as one-time charges because they were directly related to a specific event.

Common Issues

Investors often overlook the impact of one-time charges when analyzing financial statements, assuming they do not affect future profitability. However, ignoring these charges can lead to misjudging a company's financial health, especially when they indicate underlying business risks.

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Lisbon Treaty

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Labor Intensive

The term "labor-intensive" refers to a process or industry that requires a large amount of labor to produce its goods or services. The degree of labor intensity is typically measured in proportion to the amount of capital required to produce the goods or services: the higher the proportion of labor costs required, the more labor-intensive the business.

Labor Intensive

The term "labor-intensive" refers to a process or industry that requires a large amount of labor to produce its goods or services. The degree of labor intensity is typically measured in proportion to the amount of capital required to produce the goods or services: the higher the proportion of labor costs required, the more labor-intensive the business.

Fast-Moving Consumer Goods

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Fast-Moving Consumer Goods

Fast-moving consumer goods (FMCGs) are products that sell quickly at relatively low cost. FMCGs have a short shelf life because of high consumer demand (e.g., soft drinks and confections) or because they are perishable (e.g., meat, dairy products, and baked goods).They are bought often, consumed rapidly, priced low, and sold in large quantities. They also have a high turnover on store shelves. The largest FMCG companies by revenue are among the best known, such as Nestle SA. (NSRGY) ($99.32 billion in 2023 earnings) and PepsiCo Inc. (PEP) ($91.47 billion). From the 1980s up to the early 2010s, the FMCG sector was a paradigm of stable and impressive growth; annual revenue was consistently around 9% in the first decade of this century, with returns on invested capital (ROIC) at 22%.

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Negotiable Instruments

A negotiable instrument is a signed document that promises a payment to a specified person or assignee. In other words, it is a formalized type of IOU: A transferable, signed document that promises to pay the bearer a sum of money at a future date or on-demand.Common examples of negotiable instruments include personal checks, cashier's checks, money orders, certificates of deposit (CDs), promissory notes, and traveler's checks. The person receiving the payment, known as the payee, must be named or otherwise indicated on the instrument. Because they are transferable and assignable, some negotiable instruments may trade on a secondary market.

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Renewable Resource

A renewable resource is a resource that can be replenished naturally over time. As a result, it is sustainable despite its consumption by humankind.Renewable resources for the production of energy are considered especially important for their potential to replace non-renewable, or finite, resources. Additionally, renewable resources can offer cleaner energy solutions than those provided by non-renewable resources such as coal and fossil fuels.Examples of renewable resources include the sun, wind, water, the earth's heat (geothermal), and biomass.

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Feasibility Study

A feasibility study is a detailed analysis that considers all of the critical aspects of a proposed project in order to determine the likelihood of it succeeding.Success in business may be defined primarily by return on investment, meaning that the project will generate enough profit to justify the investment. However, many other important factors may be identified on the plus or minus side, such as community reaction and environmental impact.Although feasibility studies can help project managers determine the risk and return of pursuing a plan of action, several steps should be considered before moving forward.