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Strategies & Market Trends : The New Economy and its Winners
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To: Killswitch who wrote (14506)10/24/2002 9:20:39 AM
From: Oeconomicus  Read Replies (1) of 57684
 
If they're only going to recalculate these "core" numbers back to '96 or whatever recent year the article said, then you can't draw ANY conclusions from this new measure. Pension accounting has been a bizarre area for much much longer than the last five or six years. Try the last 30+ years, at least. In any case, no matter how far back you look, you can't take a whole new measure of profitability and then turn around and apply a historical average valuation multiple to it that is based on another measure entirely.

Besides, whenever you start rolling a bunch of estimated, theoretical expenses (or future expenses) like options "expenses" and pension costs into current numbers, you end up with nothing more than someone's opinion of what profits might have been had one been able to know with certainty what the real expenses were.

And what's the sense in making these adjustments to GAAP earnings instead of the more widely watched operating earnings? If only items that are truly non-recurring or non-operating in nature are excluded in arriving at operating earnings, and I'm sure S&P would stand behind this claim about their own published number, then isn't that the more meaningful measure of profitability?
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