Table 2. Frequency analysis of headline...

Table 2.

Frequency analysis of headline earnings and discretionary earnings (table by authors)

	For all 2,604 sample firm-years		For 846 firm-years with discretionary earnings
Adjustments made from GAAP earnings to headline earnings	Count	%	Count	%
Panel A: Frequency of headline earnings adjustments
Profit or loss on sale of non-financial assets	2,132	81.9	589	69.6
Impairment/reversal of impairment of non-financial assets other than goodwill	1,104	42.4	404	47.8
Profit or loss on sale of subsidiaries, associates and joint ventures	589	22.6	265	31.3
Fair value adjustments on investment property	461	17.7	263	31.1
Financial instrument adjustments (e.g. recycling of reserves)	426	16.4	176	20.8
Impairment of goodwill	389	14.9	145	17.1
Business combination adjustments (e.g. gains on bargain purchase)	343	13.2	182	21.5
Share of adjustments made by associates and joint ventures	280	10.8	153	18.1
Assets classified as held for sale adjustments (e.g. remeasurement)	234	9.0	75	8.9
Impairment/reversal of impairment of subsidiaries, associates and joint ventures	184	7.1	84	9.9
Adjustments specific to the real estate industry (linked debentures)	109	4.2	86	10.2
Recycling of foreign currency translation reserve	109	4.2	39	4.6
Other adjustments	176	6.8	86	10.2
Panel B: Frequency of discretionary earnings adjustments
			For 846 firm-years with discretionary earnings
Adjustments made from headline earnings to discretionary earnings			Count	%
Fair value adjustments on financial instruments			268	31.7
Costs of restructuring and corporate actions			221	26.1
Straight-line income/expense on operating leases			211	24.9
Consequences from business combinations other than transaction costs that were expensed (e.g. amortisation of intangible assets not previously recognised by the acquiree)			184	21.7
Fair value adjustments on items other than financial instruments (e.g. biological assets)			179	21.2
Share-based payment expense			151	17.8
Adjustments specific to the real estate industry (e.g. antecedent dividends, dividend income accrued after reporting date)			146	17.3
Transaction costs arising from business combinations that were expensed			135	16.0
Reversing/adjusting consolidation (e.g. removing consolidated investment funds)			95	11.2
Imputed interest on financial instruments			80	9.5
Working capital adjustments			66	7.8
Profit or loss on sale of financial instruments			64	7.6
Special tax items (e.g. recognition of previously unrecognised deferred tax assets)			63	7.4
Costs and resolutions of litigation			48	5.7
Other adjustments (frequently company-specific or not detailed)			412	48.7
Panel C: Frequency of reporting discretionary earnings per sample firm
	Firm-years		Unique firms
Frequency	Count	%	Count	%
All years included in sample	473	55.9	77	41.6
Every year since first reported	131	15.5	27	14.6
Every year until reporting of discretionary earnings ceased	44	5.2	10	5.4
More than once in one consecutive period within the sample period	57	6.7	16	8.7
Multiple years, not necessarily consecutive	113	13.4	27	14.6
Only once	28	3.3	28	15.1
Total firm-years/unique firms with discretionary earnings	846	100.0	185	100.0
Panel D: Terms used to describe discretionary earnings
	Firm-years
Description includes…	Count		%
Dividend/distributable earnings	228		27.0
EPRA earnings	6		0.7
Distributable earnings	218		25.8
Other	4		0.5
Earnings	213		25.2
Adjusted	17		2.0
Cash	2		0.2
Core	24		2.8
Excluding…	13		1.5
Normalised	96		11.4
Underlying	19		2.3
Combination of the above	6		0.7
Other	36		4.3
Headline earnings	405		47.8
Adjusted	115		13.6
Cash	1		0.1
Core	57		6.7
Excluding…	34		4.0
Normalised	160		18.9
Underlying	0		0.0
Combination of the above	5		0.6
Other	33		3.9
Total firm-years with discretionary earnings	846		100.0

	For all 2,604 samplefirm-years		For 846 firm-years withdiscretionary earnings
Adjustments made from GAAP earnings to headline earnings	Count	%	Count	%
Panel A: Frequency of headline earnings adjustments
Profit or loss on sale of non-financial assets	2,132	81.9	589	69.6
Impairment/reversal of impairment of non-financial assets other than goodwill	1,104	42.4	404	47.8
Profit or loss on sale of subsidiaries, associates and joint ventures	589	22.6	265	31.3
Fair value adjustments on investment property	461	17.7	263	31.1
Financial instrument adjustments (e.g. recycling of reserves)	426	16.4	176	20.8
Impairment of goodwill	389	14.9	145	17.1
Business combination adjustments (e.g. gains on bargain purchase)	343	13.2	182	21.5
Share of adjustments made by associates and joint ventures	280	10.8	153	18.1
Assets classified as held for sale adjustments (e.g. remeasurement)	234	9.0	75	8.9
Impairment/reversal of impairment of subsidiaries, associates and joint ventures	184	7.1	84	9.9
Adjustments specific to the real estate industry (linked debentures)	109	4.2	86	10.2
Recycling of foreign currency translation reserve	109	4.2	39	4.6
Other adjustments	176	6.8	86	10.2
Panel B: Frequency of discretionary earnings adjustments
			For 846 firm-years withdiscretionary earnings
Adjustments made from headline earnings to discretionary earnings			Count	%
Fair value adjustments on financial instruments			268	31.7
Costs of restructuring and corporate actions			221	26.1
Straight-line income/expense on operating leases			211	24.9
Consequences from business combinations other than transaction costs that were expensed (e.g. amortisation of intangible assets not previously recognised by the acquiree)			184	21.7
Fair value adjustments on items other than financial instruments (e.g. biological assets)			179	21.2
Share-based payment expense			151	17.8
Adjustments specific to the real estate industry (e.g. antecedent dividends, dividend income accrued after reporting date)			146	17.3
Transaction costs arising from business combinations that were expensed			135	16.0
Reversing/adjusting consolidation (e.g. removing consolidated investment funds)			95	11.2
Imputed interest on financial instruments			80	9.5
Working capital adjustments			66	7.8
Profit or loss on sale of financial instruments			64	7.6
Special tax items (e.g. recognition of previously unrecognised deferred tax assets)			63	7.4
Costs and resolutions of litigation			48	5.7
Other adjustments (frequently company-specific or not detailed)			412	48.7
Panel C: Frequency of reporting discretionary earnings per sample firm
	Firm-years		Unique firms
Frequency	Count	%	Count	%
All years included in sample	473	55.9	77	41.6
Every year since first reported	131	15.5	27	14.6
Every year until reporting of discretionary earnings ceased	44	5.2	10	5.4
More than once in one consecutive period within the sample period	57	6.7	16	8.7
Multiple years, not necessarily consecutive	113	13.4	27	14.6
Only once	28	3.3	28	15.1
Total firm-years/unique firms with discretionary earnings	846	100.0	185	100.0
Panel D: Terms used to describe discretionary earnings
	Firm-years
Description includes…	Count		%
Dividend/distributable earnings	228		27.0
EPRA earnings	6		0.7
Distributable earnings	218		25.8
Other	4		0.5
Earnings	213		25.2
Adjusted	17		2.0
Cash	2		0.2
Core	24		2.8
Excluding…	13		1.5
Normalised	96		11.4
Underlying	19		2.3
Combination of the above	6		0.7
Other	36		4.3
Headline earnings	405		47.8
Adjusted	115		13.6
Cash	1		0.1
Core	57		6.7
Excluding…	34		4.0
Normalised	160		18.9
Underlying	0		0.0
Combination of the above	5		0.6
Other	33		3.9
Total firm-years with discretionary earnings	846		100.0

Notes:

Panel D shows the terms that firms use to describe discretionary earnings. “Excluding…” indicates an earnings number which is described by referring to specific items that have been excluded, for example, “Earnings excluding share-based payment expense”. “Combination of the above” indicates an earnings number which is described by referring to a combination of other terms, for example, “Core adjusted headline earnings”

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