One-Time Charge

A one-time charge is a charge against a company's earnings that the company's managers say they expect to be an isolated event that they expect is unlikely to occur again. A one-time charge can either be a cash charge against earnings such as the cost of paying severance expenses to laid-off former employees or a non-cash charge such as the writing down of the value of assets such as a piece of real estate whose market value has fallen due to changes in business fundamentals or consumer preferences. Financial analysts routinely exclude one-time charges when they evaluate a company's ongoing earnings potential.

Some one-time charges do indeed only take place once. However, many companies incorrectly record charges that they repeatedly incur in the course of their usual business activities as one-time charges. This practice may make the company’s financial health look better than it really is and it is a practice that investors should be aware of.

For example, Acme Technology Company may properly write off costs related to restructuring its file server business as a one-time charge. However if the company also writes down inventory costs every other quarter and reports these charges as one-time charges, it is less than clear that these inventory write-down charges are truly one-time charges and Acme’s financial circumstances may be somewhat different than investors and analysts are being led to believe by the company.