ACC 556 Week 10 Discussion – Sustainable Income and Ratio Analysis

Please respond to the following:

• Identify
  and discuss two irregular items that impact sustainable income.
  Research the Internet to locate a company that was recently impacted by
  an irregular item. Do you think the irregular item(s) could have been
  avoided – provide support for your rationale.

Be sure to respond to at least one of your classmates’ posts.

Hello Classmates and Professor:

Sustainable income- The income that a company is expected to generate
on a regular basis. It is important for investors to understand
sustainable income because it gives them a better idea of the company’s
true financial performance. There are two types of irregular items that
can impact sustainable income: discontinued operations and extraordinary
items. Discontinued operations occur when a company sells or disposes
of a significant component of its business. Extraordinary items are
events that are both unusual in nature and infrequent in occurrence.

The biggest scandal to hit Apple in recent years us undoubtedly the
“batterygate” of December 2017. This started when a Reddit user reported
that a software update had reduced the performance of their IPhone but
that this had corrected itself when they replaced the battery. This post
led to a lot of press coverage, with some commentators suggesting that
Apple was trying to force users to upgrade by deliberately slowing
devices as they aged. Tim Cook issued a statement on the matter a week
after the news broke, confirming that the software was designed to
throttle performance but claiming that the intent was only to prevent
unexpected shutdowns, which could affect devices with older batteries.
The company offered a discount on battery replacements as a gesture of
goodwill for those affected.

Irregular items can make it difficult to compare the financial
performance of companies from one year to the next. Meanwhile, investors
can still get a good idea of a company’s sustainable income by paying
attention to the irregular items reported on the income statement.
Companies should take steps to avoid irregular items whenever possible,
but they should also be transparent about irregular items that do
occur.