The Portable MBA in Finance and Accounting, 3rd Edition

Analyzing Business Earnings 73

EXHIBIT 2.26 Adjustment worksheet for sustainable earnings base.

Year Year Year

Reported net income or (loss)

Add

Pretax LIFO liquidation losses
Losses on sales of fixed assets
Losses on sales of investments
Losses on sales of other asset
Restructuring charges
Investment write-downs
Inventory write-downs
Other asset write-downs
Foreign currency losses
Litigation charges
Losses on patent infringement suits
Exceptional bad-debt provisions
Nonrecurring expense increases
Temporary revenue reductions
Other
Other
Other

Subtotal

Multiply by

(1-combined federal, state tax rates)
Tax-adjusted additions

Add

After-tax LIFO liquidation losses
Increases in deferred tax valuation allowances
Other nonrecurring tax charges
Losses on discontinued operations
Extraordinary losses
Losses/cumulative-effect accounting changes
Other
Other
Other

Subtotal

Total additions

Deduct

Pretax LIFO liquidation gains
Gains on fixed asset sales
Gains on sales of investments
Gains on sales of other assets
Reversals of restructuring accruals
Investment write-ups (trading account)
Foreign currency gains
Litigation revenues

(continued)