A non-recurring item is a gain or loss found on a company’s income statement that is not expected to occur regularly. Examples of non-recurring items are litigation fees, write-offs of bad debt or worthless assets, employee-separation costs, and repair costs for damage caused by natural disasters. Analysts seeking to measure the sustainable profitability of a company typically disregard non-recurring items, as these items are not expected to affect the company’s future net income.
Non-recurring items are not always easily identifiable, as they can appear in different places on an income statement. Sometimes, non-recurring items are added to operating expenses, especially if they are closely connected to company operations (for example, repair fees on machinery). However, if the non-recurring item has a significant effect on the company’s finances, it is listed net of tax on a separate line below net income from continuing operations. Items related to new or discontinued operations, gains or losses due to accounting changes, and “extraordinary items” (items that are both unusual in nature and infrequent in occurrence) are listed this way. The analyst may find more information on a non-recurring item in the footnotes of the income statement or in the Management Discussion and Analysis section at the end of a company’s financial statements.