ACC 556 Week 10 Discussion – Sustainable Income and Ratio Analysis

Please respond to the following:

Identifyand discuss two irregular items that impact sustainable income.Research the Internet to locate a company that was recently impacted byan irregular item. Do you think the irregular item(s) could have beenavoided – provide support for your rationale.

Be sure to respond to at least one of your classmates’ posts.

Hello Classmates and Professor:

Sustainable income- The income that a company is expected to generateon a regular basis. It is important for investors to understandsustainable income because it gives them a better idea of the company’strue financial performance. There are two types of irregular items thatcan impact sustainable income: discontinued operations and extraordinaryitems. Discontinued operations occur when a company sells or disposesof a significant component of its business. Extraordinary items areevents that are both unusual in nature and infrequent in occurrence. The biggest scandal to hit Apple in recent years us undoubtedly the”batterygate” of December 2017. This started when a Reddit user reportedthat a software update had reduced the performance of their IPhone butthat this had corrected itself when they replaced the battery. This postled to a lot of press coverage, with some commentators suggesting thatApple was trying to force users to upgrade by deliberately slowingdevices as they aged. Tim Cook issued a statement on the matter a weekafter the news broke, confirming that the software was designed tothrottle performance but claiming that the intent was only to preventunexpected shutdowns, which could affect devices with older batteries.The company offered a discount on battery replacements as a gesture ofgoodwill for those affected.Irregular items can make it difficult to compare the financialperformance of companies from one year to the next. Meanwhile, investorscan still get a good idea of a company’s sustainable income by payingattention to the irregular items reported on the income statement.Companies should take steps to avoid irregular items whenever possible,but they should also be transparent about irregular items that dooccur.