Volume 4, No. 4


Restructurings: New Rules For The Game:  Restructuring charges have been a mainstay of financial reporting for years. Long ago, Ben Graham devoted a section of The Intelligent Investor to the analysis of "special charges" which contained many elements of today's restructuring charges. Graham's concern then, and that of many analysts since his time, was that restructuring charges could be a "dumping ground" for items that might not be properly matched to their respective accounting period. If items associated with future costs are included in present restructuring charges, then future earnings would be artificially inflated. Many, many restructuring charges later, accounting standards have finally been developed that limit the ability of companies to charge future expenses to current period restructuring liabilities and related charges. This standard will likely force restructuring charges to be smaller in the future - and to occur perhaps even more frequently.

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