(v5140.00) Normalized Earnings Adjustment

Use this item to change, or “normalize,” for valuation purposes, period-by-period values for Income Available for Common Shareholders (v1850) that are considered abnormally high or low because of prevailing industry or economic conditions in that year that are not expected to continue. Under the Price/Earnings Residual Value (v5200) method of calculating residual value, Income Available for Common Shareholders (v1850) forms the basis for calculating residual value in each period. Unusually high or low values for Income Available for Common Shareholders (v1850) correspondingly overstate or understate residual value.

If you enter adjustments, the amount is added to Income Available for Common Shareholders (v1850) and is used in calculating the Price/Earnings Residual Value (v5200) for valuation. Because it appears on the Income Statement, it will not change Income Available for Common Shareholders (v1850).

For example, if you believed that a final-period amount for Income Available for Common Shareholders (v1850) of $2,000 was abnormally high and should be normalized to $1,200, you would enter an adjustment of -$800 in the final period. It is used in the Price/Earnings Residual Value (v5200) calculation.