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FSA - Misclassification of expenses

A warning sign that ordinary expenses are being classified as nonrecurring or nonoperating expenses is:

falling core operating maring followed by a spike in negative special items...

what does this mean?

Nope. CFAI EOC Reading 25 Question #21. page 310

it refers to increasing core margin

TOP

gazhoo - you have written "falling core operating margin" - it should be increasing core operating margins + spike (increase) in negative special items.

not "fall in core operating margin" + Increase in negative special items. This is what I meant when I said you have it backwards.

CP

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I think you have it backwards.

It should be Increasing Core operating margin + Spike in negative special items.

Core Operating Margin = (Sales - COGS - SGA)/Sales

If this is Increasing -> Your periodic expenses COGS, SGA are going down.
So your company is shown as being increasing profitable.

At the same time you show increased levels of special items (expenses) on the footnotes to your balance sheet. When this happens - you can be sure that the company is showing up items like depreciation or genuine periodic expenses along with "one time" restructuring charges. Restructuring charges were "one time" special items.
Depreciation/Genuine periodic expenses - were true expenses - which would have reduced core operating margin - and thus shown the company up in bad light.

CP

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CP - you better pass or I will personally kick your ass.

TOP

I hope so too.... (given you are hope backwards)...

CP

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