To help us find non-recurring items to calculate, normalized, adjusted, or cleaned EBIT.

We're going to start by looking at the French gaming studio.

Ubisoft. Finding non-recurring items is a bit of a needle in a haystack.

If you want to look for them manually, you'd need to go deep in and start picking through each page.

The first place to start though is the income statement itself.

If we go via the contents page, go into the financial statements and then scroll down to the income statement.

You can see the operating profit and loss here, which is the reported EBIT. Effectively, anything below it would not affect it, and so we can ignore most of this.

Above it, we'd be looking for things which would be non-recurring, non-controlled, or non-core.

You can see the gaming studio is being pretty clear about it.

They're saying profit and loss from ordinary operating activities.

This is like them saying, here's our cleaned EBIT, and here's some things which we'd like you to be seeing as dirtying items.

Now, rather than take that on faith, we'd probably want to investigate that ourselves, so we'd want to go to note nine.

You might recall that the Gaming studio has quite a nice contents page, not just its overall contents page, but that of its financial statements, and when we click through to the notes part of that, the notes themselves have their own contents page, which is very helpful.

Note nine is then clickable and you can see the sorts of things When we scroll down to the notes that are within those dirtying items, which get us from non clean D bit to clean D bit, you can see that there are things like impairments that're being laid out here in prose as well, which is very helpful.

What's happening is there's an impairment loss and restructuring costs.

They're around the cloud gaming activity, so what appears to have happened is that part of the business is not doing very well.

Its earning power is diminished.

It's not seen as a very valuable asset anymore, and it's been impaired in the books, which means there's been an extraordinary depreciation event.

This will be registered as a loss within the year, but analysts might want to ignore that going forwards.

For example, when building models or seeing normalized EBIT, and so here it's being laid out as a non-recurring item.

Not all companies put their operating income adjustments on the face of the p and l.

You may have to go looking for adjusted, cleaned, core reconciling or non IFS or non-GAAP items.

A good way to find this is to look for the key figures, which are often early in the annual report.

If we go back to the contents page for the French gaming studio, we can see the section 2.6 is a review of the year on non IFRS data.

That's key wording because they're saying it's adjusted or cleaned.

When we click in, they start telling us how they've done their cleaning.

Very, very helpful. They then do a reconciliation and say, here are the things which lead us from our cleaned to uncleaned.

Let's have another look at cleaned and non uncleaned with another company.

Let's look at GameStop next.

Let's use their 10 K. As it's a bit more detailed.

We are looking for their income statement.

A table of contents says financial statements.

Then we have statement of operation, and you can see that what we've got here, we've got an operating loss, and that's the reported EBIT IE non uncleaned.

I can ignore most things below that, so I'm looking above and thinking, are any of these clearly non-recurring and a very suspect item immediately is the asset impairment.

As this is US Gap Company, there's no note that signaled here to show me where to go looking for that asset impairment.

I need to go looking for it manually or hope that they have a really good contents page for the notes.

I'm looking around and I can see that there are notes here.

The problem I've got is that the asset impairment could be in a number of places.

It could be in PP E, it could be in intangibles, for example.

It could be in goodwill.

Asset impairment is a fairly vague term with a good strong term like impairment.

We could control effort. IE search for it.

We immediately pick up the impairment on the face of the financial statements.

Then in the cashflow statement, as it's non-cash, We can see that there's some pros around pp and e impairment losses, but it doesn't really say what they are or how much they are.

Again, for intangibles, it talks about impairments.

Here in the segmental information, we can see where the impairments have happened, which is quite helpful, but we still don't know what they are.

Finally, here, we've got something substantial.

It's actually under the lease note and it says, we have right of use assets, which impaired 2.7 million, and so you can see that we had around 9.7 million of impairment on the face of the income statement. If my memory serves and now we've accounted for 2.7 of it, but what we are not seeing is a particularly strong table that just lays out all of the impairments.

This can be very troubling. Non-recurring costs can be very hard to track.

We might think, well, for the European company, the company had a discussion about non IFRS facts and figures.

Can't we find the same thing here for GameStop? The problem we've got is the SEC doesn't allow companies to talk about alternative performance measures such as EBIT, EBITDA cleaned, that kind of thing.

Within the 10 K itself, what we'll have to do is come out with the 10 K and go into one of the press releases.

Let's look at the press release for the accompanying year.

You can see that immediately. The tone is very different.

It's more qualitative as immediately talk of alternative measures such as ebitda, EBIT, that kind of thing, and there's immediate talk of adjustment, so this is a more investor facing document.

Just to be clear, a European company often would combine this with that annual report, whereas a US company would split it out into what we're looking at now, which is called the pr, the press release.

If we scroll down to page nine, we can see the kind of reconciliation we saw for the European company where we get to the non-GAAP results.

What we're interested in here is those asset impairments.

You can see they're all represented here, and there's a little note that says the asset impairment was associated with some sort of divestment, so we'll get a little more detail in the PR as to what has caused the non-recurring than we perhaps would in the 10 K itself.

This can make the PR very helpful for American companies.