Special Items on the Income Statement

Does anyone know where this comes from? I was trying to reconcile it with actual financial statements and I can’t figure out which line items this would include. Does anyone know which Compustat line items it includes? Or is it just one specific Compustat line item?

It’s one specific CompuStat line, code SPI. In our internal testing the lion’s share of it was usually discontinued operations, but it’s a consolidated line.

CompuStat, in order to normalize the data will sometimes combine several lines as reported in the 10-K or 10-Q into a more general line for use in programs like P123.

Imagine that a company reported an above the gross section on the income statement that looked like this:

Revenues from Widgets $1,000
Revenues from Butter $1,000
Revenues from Guns $1,000
Cost of Goods Sold $2,500
Gross Profit $500

You can pretty much expect that CompuStat is going to report

Revenues $3,000
COGS $2,500
Gross Profit $500

That’s because the consolidated revenue line is more comparable in the CompuStat product – and on P123, for that matter – than the butter/guns/widget breakdown. I would also expect, though I’ve never seen the data entry interface for CompuStat, that there is no Revenues from Widgets line at all, so it’s probably handled at the data entry level. (That is just my supposition, though.)

Anyway, special items is a consolidated line. Here’s the S&P description of what goes into it:

All of which you should take as it’s possible, though by no means easy, to figure out what’s in there for a single company looking at a single period. It’s more or less hopeless across the whole universe.

Do you think that special items is consolidated at the data entry level as well?

Probably, but that’s just a guess.

That’s a safe assumption, based on the fact that CompuStat was originally based on a normalized financial statement model.

And if it helps, here is how it works for the income statement:

In about 90% of cases:

OpInc = Sales - CostG - SGandA - DepAmort - RandD

IncBTax = OpInc - IntExp + ExpNonOp + SpcItems

NetIncBXorNonC = IncBTax - IncTaxExp

IncBXorForCom = NetIncBXorNonC - mii

About 6-7% of the time, RandD is not subtracted from operating income (especially for manufacturers).

About 6-7% of the time, SpcItems is not added back to operating income.

We don’t get minority interest (mii) on the income statement, but we can recover this item through hacking the income statement.

Most of the rest of the 3-4% outliers should represent unhandled NAs and outliers on the consolidated statements of income (we don’t have access to this statement in P123). While CompuStat’s financial statement balancing model should be catching any outright errors, clearly data entry errors are possible.