Over the last decade or so, analysts have begun to focus more on companies' operating performances. This tempts managers to show operating profit in the best possible light, and they sometimes present it as more representative of the company's recurrent performances.
Regardless of what name it comes under, what the analyst is looking for is the operating figure that is recurrent in nature. It is thus on this yardstick alone that the analyst must look at income and costs for his assessment.
IAS definitions are:

• operating income: any activity undertaken by a company in the course of ordinary business, as well as ancillary activities or activities that are a natural extension of, or that result from, these activities;
• non operating income: income and costs resulting from events or transactions that are clearly distinct from the company's ordinary activities and which are not expected to occur frequently or regularly, for example: asset expropriation, or earthquakes and other natural catastrophes.

The most commonly used approach consists of excluding unusual items, as this is understood under IAS 8, from recurrent profit. While in theory this reflects operating performances that are more standard and useful for the analyst, non operating income in practice is often denatured by the inclusion of recurrent items. Similarly, net financial income sometimes contains items that should more accurately be written down under operations.
Below we present some items from annual reports recently published by European groups.

Recurrent capital gains and losses
The yearly disposal of a comparable amount of assets makes the management of a company's assets an extension of its business and it is no longer to be considered unusual. The results of these disposals should thus show up under net operating income.

Redundancy payments, pensions, etc.
As these are sums that the company pays or pledges to pay each year in one or several sums to retiring employees, they obviously must be considered as recurrent operating expenses, with the exception of the fraction resulting from the annual revaluation of future costs, which comes under financing costs.

Discounts
A discount is a price reduction granted when payment is made prior to the date indicated in the terms of sale, without the buyer or seller having agreed beforehand to early payment. While discounts are considered a financial item in the financial statement, it seems more logical to put them under operating costs in the consolidated accounts.
To understand this point, let's look at how discounted cash flow valuation works. Discounts neither create nor destroy value - they simply remunerate time. Early payment allows a company to reduce its working capital and thus its debt level.
The capital employed figure resulting from the valuation will be reduced by a correspondingly lower debt level. In exchange, there is a reduction in operating cash flow, leading to a reduction in the capital employed figure that is equivalent to the discount, which is then offset by lower debt on the balance sheet.

Securitisation costs
Securitisation costs, not counting arrangement fees, are equivalent to the difference between the value of the receivables and the price at which they have been transferred. For transfers with recourse (the most common case) the cost is equal to the remuneration of the securitisation entity's capital during the time until collection. A transfer reduces working capital and thus group debt. In the case of transfers without recourse, in addition to time value, companies are charged for the risk of default fir certain receivables. In exchange, they are dispensed from booking provisions on receivables, which would be operating costs.
The securitised receivables are either on the balance sheet and, in this case, securitisation costs are booked under financing costs, or they are not on the balance sheet (transfers without recourse) and they must then be booked under operations.

The impact of currencies on normal operations
This is the impact of fluctuating exchange rates on the value of operating assets and liabilities resulting from the company's transactions. This occurs when currencies have not been hedged or have been imperfectly hedged. As the impact is directly linked to the company's daily operations, it should, in our view, be reflected under its operating performance.

Cost of hedging operating assets and liabilities
These costs mainly include premiums for options used for hedging. For the same reasons as before, we feel these are operating costs.

Pre-opening costs
Putting these under exceptional costs allows the company to keep costs that it wished to defer or had to defer, out of its operating results. While this can help analysts who seek a normative structure (no income has yet been booked to go with this cost), they should restate them under operating results.

Restructuring costs
Many major groups book significant restructuring costs every year. While these can be considered unusual at the level of a smaller company or division, they are not unusual for major groups, which, given the diversity of their businesses, restructure somewhere or another every year, in which case we would advise booking them under operations.

Environmental costs
Whether due to environmental protection codes, upgrades or fines, environment costs are directly linked to the goods sold, despite the fact that they are decided outside the company. They are therefore operating costs.

Let us take the example of Lafarge, which we can only hope will come into general use.
Lafarge distinguishes between "recurrent operating profit" from "operating profit", which includes non-recurrent income and costs. This approach has the advantage of reconciling the normative view that is useful to analysts while reflecting the company's true performances. However, it does require highly detailed information in the appendix to understand the choices made.