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QuestionsCategory: Valuation QuadrantExtraordinary Items: Alphabet
Darren Seah asked 2 months ago

Hi Victor,
I would need some clarifications on Extraordinary Items. I understand that these are items that are not recurring in nature. To calculate the total value of “Other Income” (using Alphabet as an example) for FY2021 (page 74), can I just use $12,020 – $1,499 (interest income) = $ 10,521 to get a rough estimation of the value. I do consider interest income as something that is recurring in nature but do correct me if I’m wrong. 
Do I really need to add up the individual components that are considered Extraordinary Items to get an accurate  value for it? I do sometimes face the issue of what items are considered Extraordinary Items in some of the report for other companies as they can be unclear/unfamiliar to me. 
Thanks a lot. 

2 Answers
Victor Chng answered 1 month ago

Hi Darren,

So sorry for the late reply cause I did not get the email notification for your question.

Yes, you can exclude the interest income as it can be recurring.

It really depends on the amount. If the figures are a small amount less than 5% of total profit, I think you can just ignore the extraordinary items.

Hope this helps :)

Darren Seah replied 1 month ago

Hi Victor,

Thanks for your response.

If there are items under “Other income” that I’m unsure whether it is recurring or non-recurring in nature, can I just use the total amount under “Other income” to minus away items that I’m sure that is considered recurring in nature (such as interest income etc) to get a rough gauge of the Extraordinary Items? As indicated in my earlier example, can I just use $12,020 – $1,499 (interest income) = $ 10,521 to determine the rough indication of the extraordinary items?

Darren Seah replied 1 month ago

Hi Victor,

Thanks for your response.

If there are items under “Other income” that I’m unsure whether it is recurring or non-recurring in nature, can I just use the total amount under “Other income” to minus away items that I’m sure that is considered recurring in nature (such as interest income etc) to get a rough gauge of the Extraordinary Items? As indicated in my earlier example, can I just use $12,020 – $1,499 (interest income) = $ 10,521 to determine the rough indication of the extraordinary items?

Victor Chng answered 4 weeks ago

Hi Darren,
 
Yes, you can just use the total amount under other income and minus interest income. Your method is valid. 

Darren Seah replied 4 weeks ago

Thanks a lot, Victor :)

Darren Seah replied 4 weeks ago

Thanks a lot, Victor :)

Victor Chng replied 3 weeks ago

welcome :)