A one-time item is an irregular line item on a company’s income statement which does not occur as a result of a company’s regular operations. Examples of one-time items can include gains or losses resulting from the sale of an asset, merger or acquisition, legal or court settlement, or restructuring costs. Unlike ongoing operating costs and revenue sources associated with the company’s main business, one-time items are non-recurring and should be removed when considering a company’s core performance.

For example, a company’s operating costs include items such as salaries, rent, utilities, and materials. Revenue generated from sales of products and services are also considered part of the company’s core operations. However, expenses related to a lawsuit settlement, the sale of a building, or the repurchase of stock are one-time events and are not associated with ongoing operations.

In order to effectively measure and compare the performance of companies, analysts and investors usually prefer to ignore one-time items on a company’s income statement. As one-time items are usually not considered part of core operations they may distort the company’s actual performance. By removing these types of items, potential investors can better gauge a company’s performance and better compare the performance of one company to another.

Regardless of how one-time items are removed, the most important thing to remember is that these items are not indicative of the company’s core operations. Although one-time items can distort the comparison of one company to another, analysts and investors can gain an understanding of a company’s performance by excluding these items from the income statement. Doing so allows investors to compare the core performance of various companies and can provide a better evaluation of their investment opportunities.