Earnings persistence Recasting and Adjusting Specific Recasting Procedures Discretionary expenses are segregated Distinct components are segregated(such as equity in income of unconsolidated subsidiaries) and often reported net of tax When com ponents of continuing income are separately reclassified, their pre-tax amounts along with their tax effects must be rem oved Income tax disclosures enable one to separate factors that either reduce or increase taxes such as: Deductions-tax credits, capital gains rates, tax-free income, lower foreign tax rates Additions--additional foreign taxes, non-tax-deductible expenses, and state and local taxes(net of federal tax benefit)Specific Recasting Procedures • Discretionary expenses are segregated • Distinct components are segregated (such as equity in income of unconsolidated subsidiaries) and often reported net of tax • When components of continuing income are separately reclassified, their pre-tax amounts along with their tax effects must be removed • Income tax disclosures enable one to separate factors that either reduce or increase taxes such as: ➢ Deductions—tax credits, capital gains rates, tax-free income, lowerforeign tax rates ➢ Additions—additional foreign taxes, non-tax-deductible expenses, and state and local taxes (net of federal tax benefit) Earnings Persistence Recasting and Adjusting