Method for assessing the economic earnings performance of a business enterprise

• US 20040128217A1
• Filed: 11/01/2002
• Published: 07/01/2004
• Est. Priority Date: 11/01/2002
• Status: Abandoned Application

• Current Assignee: Standard & Poor's Financial Services LLC (S&P Global Inc.)
• Original Assignee: Standard & Poor's Financial Services LLC (S&P Global Inc.)
• Inventors: Friedman, Robert E., Silverblatt, Howard J., Blitzer, David M.
• Application Number:
  US10/285,676
• Publication Number:
  US 20040128217A1
• Time in Patent Office: Days
• US Class Current: 705/35
• CPC Class Codes: G06Q 30/02 Marketing; Price estimation or determination; Fundraising
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes

Abstract

Period economic earnings performance of a business enterprise is calculated using only those revenues generated by the enterprise'"'"'s stipulated commercial activities and the expenses realized, directly or indirectly, in the generation of those revenues. Income and expenses generated by activities of the enterprise that are extraneous to the stipulated commercial activities are excluded from the calculation of the enterprise'"'"'s period earnings. According to one implementation, earnings performance is calculated according to the present invention by starting with the enterprise'"'"'s as-reported earnings, calculated in accordance with Generally Accepted Accounting Principles, and making adjustments to the as-reported earnings to include certain specified items that were not included in the as-reported earnings and to exclude other specified items that were included in the as-reported earnings.

Claims

1. A method for assessing economic earnings of a business enterprise for a given period, said method comprising:

(a) including expenses associated with granting stock options to employees of the business enterprise;

(b) including expenses associated with restructuring ongoing commercial operations of the business enterprise;

(c) including write-downs of depreciable or amortizable assets employed in the commercial operations of the business enterprise;

(d) including at least a portion of the costs incurred in the administration of an employee pension plan for the benefit of employees of the business enterprise;

(e) including expenses associated with research and development purchased by the business enterprise;

(f) including expenses related to mergers and acquisitions;

(g) including unrealized gains and losses from hedging activities;

(h) excluding charges associated with impairment of goodwill of the business enterprise;

(i) excluding gains or losses from sale of assets of the business enterprise if the stipulated commercial activities of the business enterprise do not entail selling a portion of its assets;

(j) excluding gains realized by the employee pension plan;

(k) excluding litigation settlements;

(l) excluding insurance proceeds; and

(m) excluding reversals of prior period charges and reversals of prior period provisions incurred by the business enterprise in a period preceding the given period, wherein, if an item is excluded from assessing the business enterprise'"'"'s earnings, it is not counted in calculating the earnings, and if an item is included in assessing the business enterprise'"'"'s earnings, it is counted in calculating the earnings.

2. The method of claim 1, wherein the costs incurred in the administration of the employee pension plan include service costs and interest costs, wherein service costs are included in assessing the business enterprise'"'"'s earnings, interest costs not offset by actual gains realized on the assets of the employee pension plan are included in assessing the business enterprise'"'"'s earnings, and interest costs that are offset by actual gains realized on the assets of the employee pension plan are excluded in assessing the business enterprise'"'"'s earnings.

3. The method of claim 1, further comprising including gains and losses from the sale of specified assets of the business enterprise if the stipulated commercial activities of the business enterprise entail selling at least a portion of the specified assets.

4. A method for assessing economic earnings of a business enterprise for a given period by making specified adjustments to an as-reported earnings assessment calculated for the given period in accordance with Generally Accepted Accounting Principles, said adjustments comprising:

(a) subtracting gains realized by an employee pension plan from the as-reported earnings;

(b) subtracting charges associated with impairment of goodwill of the business enterprise from the as-reported earnings;

(c), subtracting from the as-reported earnings gains and losses from the sale of assets of the business enterprise if the stipulated commercial activities of the business enterprise do not entail selling a portion of its assets;

(d) subtracting any proceeds received from litigation settlement from the as-reported earnings;

(e) subtracting any proceeds from settlement of insurance claims from the as-reported earnings; and

(f) subtracting reversals of prior period charges and reversals of prior period provisions incurred in a period preceding the given period from the as-reported earnings.

5. The method of claim 4, further comprising adding to the as-reported earnings the amount of interest costs associated with administration of an employee pension plan for the benefit of employees of the business enterprise to the extent that the interest costs are not offset by actual gains realized on the assets of the employee pension plan.

6. The method of claim 4, further comprising subtracting stock option expenses incurred during the period from the as-reported earnings.

7. A method for assessing economic earnings of a business enterprise for a given period, said method comprising:

(A) adding operating revenues generated from the stipulated commercial activities of the business enterprise, wherein said operating revenues do not include;

(1) gains realized in an employee pension plan, (2) proceeds received from litigation settlement, (3) proceeds from settlement of insurance settlement, and (4) reversals of prior period charges and reversals of prior period provisions incurred by the business enterprise in a period preceding the given period; and

(B) subtracting from said operating revenues operating expenses realized directly or indirectly in generating said operating revenues, said operating expenses including;

(1) expenses associated with granting stock options to employees of the business enterprise, (2) expenses associated with research and development purchased by the business enterprise, (3) expenses associated with restructuring ongoing commercial operations of the business enterprise;

(4) write-downs of depreciable or amortizable operating assets of the business enterprise, and (5) at least a portion of costs associated with the administration of said employee pension plan.

8. The method of claim 7, wherein the costs associated with the administration of the employee pension plan include service costs and interest costs, wherein said operating expenses include said service costs and a portion of said interest costs not offset by actual gains realized on the assets of the employee pension plan, and said operating expenses do not include a portion of said interest costs that are offset by actual gains realized on the assets of the employee pension plan.

9. The method of claim 7, wherein said operating expenses do not include charges associated with impairment of goodwill of the business enterprise.

10. A method for assessing economic earnings of a business enterprise for a given period by aggregating specified revenues and specified expenses incurred by the business enterprise during the course of the given period, said method comprising:

(a) excluding goodwill impairment expenses;

(b) excluding gains or losses from the sale of asset of the business enterprise if the stipulated commercial activities of the business enterprise do not entail selling a portion of its assets;

(c) excluding gains realized by the employee pension plan;

(d) excluding litigation settlements;

(e) excluding insurance proceeds; and

(f) excluding reversals of prior period charges and reversals of prior period provisions incurred in a period preceding the given period, wherein if an item is excluded from assessing the business enterprise'"'"'s earnings, it is not counted in calculating the earnings.

11. The method of claim 10, further comprising including one or more of:

(a) expenses associated with granting stock options to employees of the business enterprise;

(b) expenses associated with restructuring ongoing commercial operations of the business enterprise;

(c) write-downs of depreciable or amortizable operating assets of the business enterprise;

(d) at least a portion of the costs associated with the administration of an employee pension plan;

(e) purchased research and development expenses;

(f) expenses related to mergers and acquisitions; and

(g) unrealized gains and losses from hedging activities, wherein if an item is included in assessing the business enterprise'"'"'s earnings, it is counted in calculating the earnings.

12. A method for assessing economic earnings of a business enterprise for a given period by aggregating specified revenues and specified expenses incurred by the business enterprise during the course of the given period, said method comprising excluding one or more of:

(a) gains realized by an employee pension plan;

(b) litigation settlements;

(c) insurance proceeds; and

(d) reversals of prior period charges and reversals of prior period provisions incurred in a period preceding the given period, wherein if an item is excluded from assessing the business enterprise'"'"'s earnings, it is not counted in calculating the earnings.

13. The method of claim 12, further comprising excluding one or more of:

(a) expenses associated with impairment of goodwill of the business enterprise; and

(b) gains or losses from sales of assets of the business enterprise if the stipulated commercial activities of the business enterprise do not entail selling a portion of its assets.

14. The method of claim 12, further comprising including one or more of:

(a) expenses associated with granting employee stock options;

(b) restructuring expenses from ongoing operations;

(c) write-downs of depreciable or amortizable operational assets;

(d) at least a portion of the costs incurred in the administration of an employee pension plan;

(e) purchased research and development expenses;

(f) expenses related to mergers and acquisitions; and

(g) unrealized gains and losses from hedging activities, wherein if an item is included in assessing the business enterprise'"'"'s earnings, it is counted in calculating the earnings.