$ millions GE Industrial earnings (loss) Less: Nonoperating pension benefit costs (net of tax) . . . . . . . . Less: Gains and impairments for disposed or held for sale businesses (net of tax) ..... Less: Restructuring and other (net of tax) Less: Goodwill impairments (net of tax).. Less: GE Industrial U.S. tax reform enactment adjustment.... Adjusted GE Industrial earnings (loss) (Non-GAAP).. ..... ..... .... 2018 $(20,587) (2,184) 2017 $(1,841) (1,550) 974 864 (2,948) (2,778) (22,371) (1,156) (38) (4,905) $5,980 $ 7,685 2016 $9,048 (1,527) 2,374 (2,483) $10,684 Required a. Explain how the non-GAAP items (in total) affected adjusted earnings each year. Are the adjustment significant? b. GE makes five specific adjustments. Are any of the adjustments likely beyond the company's control c. Calculate the year-over-year change (in % terms) in reported net income for 2017 and 2018. Calculat the year-over-year change (in % terms) in the non-GAAP net income. Which trend do we believe mor accurately depicts GE's performance over this period?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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General Electric (GE) disclosed the following non-GAAP reconciliation for its Industrial segment from
its 2018 Form 10-K.
$ millions
2018
2017
2016
GE Industrial earnings (loss)
Less: Nonoperating pension benefit costs (net of tax).
Less: Gains and impairments for disposed or held for sale
businesses (net of tax)
Less: Restructuring and other (net of tax)
Less: Goodwill impairments (net of tax).
Less: GE Industrial U.S. tax reform enactment adjustment
$ 9,048
$(20,587)
(2,184)
$(1,841)
(1,550)
(1,527)
974
864
2,374
(2,948)
(22,371)
(38)
(2,778)
(1,156)
(4,905)
(2,483)
Adjusted GE Industrial earnings (loss) (Non-GAAP)
$ 5,980
$ 7,685
$10,684
Required
a. Explain how the non-GAAP items (in total) affected adjusted earnings each year. Are the adjustments
significant?
b. GE makes five specific adjustments. Are any of the adjustments likely beyond the company's control?
c. Calculate the year-over-year change (in % terms) in reported net income for 2017 and 2018. Calculate
the year-over-year change (in % terms) in the non-GAAP net income. Which trend do we believe more
accurately depicts GE's performance over this period?
Transcribed Image Text:General Electric (GE) disclosed the following non-GAAP reconciliation for its Industrial segment from its 2018 Form 10-K. $ millions 2018 2017 2016 GE Industrial earnings (loss) Less: Nonoperating pension benefit costs (net of tax). Less: Gains and impairments for disposed or held for sale businesses (net of tax) Less: Restructuring and other (net of tax) Less: Goodwill impairments (net of tax). Less: GE Industrial U.S. tax reform enactment adjustment $ 9,048 $(20,587) (2,184) $(1,841) (1,550) (1,527) 974 864 2,374 (2,948) (22,371) (38) (2,778) (1,156) (4,905) (2,483) Adjusted GE Industrial earnings (loss) (Non-GAAP) $ 5,980 $ 7,685 $10,684 Required a. Explain how the non-GAAP items (in total) affected adjusted earnings each year. Are the adjustments significant? b. GE makes five specific adjustments. Are any of the adjustments likely beyond the company's control? c. Calculate the year-over-year change (in % terms) in reported net income for 2017 and 2018. Calculate the year-over-year change (in % terms) in the non-GAAP net income. Which trend do we believe more accurately depicts GE's performance over this period?
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