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One Time Charge

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A one time charge is a charge against earnings that is unusual in nature and not expected to reoccur. An example of a one time charge is the costs of closing a plant damaged by an earthquake. Unlike a one-time charge, normal expenses -- like cost of goods sold and SG&A -- are part and parcel of the regular, ongoing activities of the business. A one-time charge is distinguished from such normal expenses by presenting it as an extraordinary item on the income statement. Companies thus have a strong incentive to present expenses as a one time charge: If investors consider an item a one-time charge, they will discount it and exclude it from their earnings estimates for future periods. In this fashion, classifying an item as a one-time charge can increase EPS estimates and valuations. It's not surprising firms sometimes attempt to classify expenses that are part of their normal business activities and may indeed reoccur - such as an inventory write-downs -- as a one-time charge. Note that a one-time charge is also called a nonrecurring charge.



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