Restructuring charges are usually treated as one-time items. But the analyst must be careful. Restructurings of businesses can take a number of quarters or even years.
Up to 2002, firms would book an estimate of the total cost of a restructuring as a liability obligation then reduce the liability as costs were incurred. As explained in chapter 10, that led to the abuse of overestimating the liability than bleeding back any estimated cost not incurred to boost income in the future⸺the big bath problem. FASB Statement 146 and IAS 37 checked this practice by requiring restructuring charges to be booked mainly as they were incurred. That, however, had the effect of losing the information in the estimated liability for restructuring charges to be recognized over several periods in the future. And initial charges recognized as incurred might not be one-time items, leaving open the question of whether there will be further charges subsequently.
A case in point is Procter & Gamble (PG). By 2001, the firm had booked restructuring charges as they were incurred over seven quarters, totaling $1.3 billion, with indications the total would later go to $4.0 billion. With so many consumer products succeeding or failing, P&G’s restructuring charges are likely to be recurring. So are they really unsustainable items? As of 2024, the company was conducting an annual restructuring program “to maintain a competitive cost structure,” with annual restructuring charges ranging from $250 to $500 million. For the fiscal quarter ending September 2024, a restructuring charge of $886 million was booked. Better to see these charges as repeating costs of doing business?
By 2025, Xerox had reported impairments of goodwill in three out of the four previous years.