David Henry, in a March 2003 BusinessWeek article entitled, "Ouch! Real Numbers," indicates that new accounting rules will deflate earnings hype and, perhaps, stocks. He describes tighter accounting rules that will reveal a lower level of normal earnings.
Henry goes on to say that extraordinary items were once just that—extraordinary. In recent years, however, they have become much too common, with large adjustments taken for certain "special one-time items."' such as layoffs, inventory write-downs, acquisitions (of other companies), and so on.
Instructions
Why do you think there has been an increase in the frequency of "special items'" in the income statements of major U.S. corporations? Is it important for different companies to treat these special items in the same way? Why or why not?
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