One-time gains/losses

One-time gains and losses, also known as nonrecurring, unusual, or extraordinary items, are financial events reported on a company's income statement that are not part of its regular, ongoing business operations. These items are distinguished from typical revenues and expenses, which stem from a company's primary activities of selling goods or services.

The primary purpose of separately reporting one-time gains and losses is to provide a clearer picture of a company's core operating performance. Since these events are not expected to recur, analysts and investors often exclude them when evaluating the company's sustainable profitability.

How They Are Reported on the Income Statement:

One-time gains and losses are typically presented distinctly from a company's normal operating results. They are often listed below "Net income from operations" or "Earnings before interest and taxes (EBIT)" to highlight their non-operating nature. An income statement may be structured into two sections: one for ordinary business activities and another for these unusual or extraordinary items. They might appear as a separate line item, sometimes grouped under "other income" or "nonrecurring charges," and are usually accompanied by footnotes that provide detailed explanations.

Examples of One-Time Gains and Losses:

Common examples include:

• Gains or losses from the sale of assets: Such as equipment, property, or investments.
• Restructuring charges: Costs associated with reorganizing a company's operations.
• Asset impairment or write-offs: When the market value of an asset falls below its book value.
• Losses from discontinued operations: Financial impacts from shutting down a segment of the business.
• Costs related to mergers and acquisitions (M&A) or divestitures.
• Losses from early retirement of debt.
• Settlements of lawsuits: Both payments made (losses) and awards received (gains).
• Corrections of errors from previous financial reports.
• Losses from natural disasters or employee strikes: Provided these are not regular occurrences for the business.

It is important to note that only realized gains and losses—those resulting from completed transactions—are reported on the income statement. Unrealized gains or losses, which are "paper" profits or losses from assets still held, are typically recorded in the accumulated other comprehensive income section of the balance sheet until the asset is sold.