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Kimberly-Clark‟s note provides further details, listing asset impairment charges for each year and
describing the pattern of actual cash payments. Then the note provides the following schedule, which
identifies where the restructuring charges are reflected on the income statement:
Using this information, and more provided in the note, we can identify and assess the effects of the
restructuring charges on individual expenses, on pretax income, and on after-tax income from
continuing operations. Although discussed in the MD&A, these charges are not revealed on any of the
financial statements. The note is critical to our understanding of these activities.
Historically, firms have exhibited a tendency to overaccrue restructuring charges. Companies facing
a poor year already may decide to take a “big bath” and recognize excessive amounts of restructuring
costs. By accelerating these costs, the company relieves future profits of this burden and will,
therefore, look stronger. Other companies seem more inclined to spread these charges out over several
years, minimizing their effects and reflecting the longer-term nature of some restructuring plans.
Because of their common recurrence, these charges are sometimes dubbed “cockroach” charges—
from the old saying that if you see one cockroach, there are more where it came from. Still, even when