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Even in cases where tax avoidance or deferral isn’t a main reason for making the investment – in which case the OIFP rules should not apply – the taxman may choose to apply the rule anyway. (seb_ra/Getty Images/iStockphoto)
Even in cases where tax avoidance or deferral isn’t a main reason for making the investment – in which case the OIFP rules should not apply – the taxman may choose to apply the rule anyway. (seb_ra/Getty Images/iStockphoto)

How five companies use non-standard financial measures to make earnings look better Add to ...

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BCE and the case of recurring charges

It makes sense that a company might want to exclude a one-time expense from the earnings it reports to shareholders. But what happens if it has one “one-time” expense after another?

One company that does is BCE Inc., which has made strategic acquisitions a key part of its business model. BCE has adjusted for “severance, acquisition and other costs” each year for the past five years, Veritas says. (In 2015, BCE added $446-million back to its $2.73-billion in net earnings, on its way to $8.55-billion in “adjusted EBITDA.”) The company says it excludes the expenses and uses adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) and adjusted EBITDA margin so it can evaluate the “ongoing profitability” of its businesses. “The implication is that it is non-recurring,” Veritas says. “If a company does a single acquisition, the costs can be reasonably argued to be non-recurring in nature. However, we would argue that a company whose primary strategy is growth-by-acquisition should not exclude transaction-related costs as these are simply a cost of doing business.”

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