when companies publish their financials generally accepted accounting principles gaap require them to disclose how much profit they generated this is calculated by subtracting all dollar costs from revenue the same calculation used to determine how much income tax to pay 
often companies will choose to supplement this figure with their own calculation underlying profit is designed to offer a more useful indicator of performance on a year by year basis stripping out unusual non recurring costs such as natural disaster damage charges irons out random fluctuations and should in theory make it easier for investors to get a better idea of how the company s profit from its everyday standard business operations varies over several fiscal years companies often use underlying profit figures for business planning purposes the goal here is to eliminate any distractions caused by random occurrences losses or gains that do not regularly crop up such as restructuring charges or the buying or selling of land or property are usually not taken into account because they do not occur often and as a result are not deemed to reflect the everyday costs of running the business in general only regular operating expenses considered to be predictable or required will be deducted from gross sales in order to arrive at the underlying profit they can include the following example of a one time event removed for the calculation of underlying profitif a company is in full ownership of two buildings and one is currently in use while one is sitting vacant it may choose to sell the vacant building while the sale of this asset must be recorded for standard accounting purposes it is excluded from the calculation of underlying profit the sale of a large asset such as a building is not a standard part of the business s operation and is not expected to occur again soon though it has resulted in a form of income it is not likely to be repeated in subsequent accounting cycles for the company advantages of underlying profitaside from giving investors an indication of how much money a company makes from its standard business operations underlying profit is also used by management for business planning a business plan is a functional road map providing direction as to how the company will operate and is often the founding document drafted by new ventures from an accounting perspective the business plan also denotes the expected expenses that must be covered over a particular period of time 