what is a restructuring charge 
a restructuring charge is a one time expense that a company pays when reorganizing its operations examples of one time expenses include furloughing or laying off employees closing manufacturing plants and shifting production to a new location companies undertake these moves in an effort to boost profitability but first take a one off hit in the form of an upfront restructuring charge the idea is that once that charge is taken there should be no other expenses related to the particular reorganization understanding restructuring chargescompanies restructure their operations to improve efficiency and boost profitability over the long term so restructuring charges can occur for a variety of reasons these include when a company makes an acquisition sells a subsidiary downsizes implements new technology relocates assets decreases or consolidates debt diversifies into a new market or writes off assets whatever the reason a company restructuring is usually driven by a need for change in the organization or business model for instance a company that chooses to restructure is often experiencing significant problems such that it is prepared to stomach certain added costs to improve its fortunes restructuring charges are nonrecurring operating expenses that show up as a line item on the income statement and factor into net income because the charge is an unusual or infrequent expense it is unlikely that it will impact shareholders stakes in the company in other words news of a restructuring charge probably won t significantly impact a company s share price to find out more details about a restructuring charge investors should consult the relevant footnote to the financial statements additional information might also be found in the management discussion and analysis md a section of the financial statement a restructuring charge will cost a company in the short term but should save it money in the long run example of a restructuring chargedue to worrisome industry forecasts company a has decided to downsize operations it lays off several employees who each receive severance checks the severance cost associated with this structural change in the business is a restructuring charge in contrast company z is flourishing and growing rapidly the company decides to hire more employees to keep up with its expansion the costs associated with hiring new staff such as signing bonuses and acquiring more office space are also classified as restructuring charges special considerationsa restructuring charge will be mentioned in financial analyses as decreasing a company s operating income and diluted earnings as a result restructuring charges will often have a significant impact on a company s income statement net income may be manipulated by inflating the amount for a restructuring charge the charge is purposely exaggerated in order to create an expense reserve that will be used to offset ongoing operating expenses creative accountants use the restructuring provision to get rid of losses through one time charges and to clean out the books in effect a large restructuring charge is reported so the company can take a big hit to earnings in the current period in order to make future period earnings appear more profitable analysts closely scrutinize any restructuring charge that shows up on a company s income statement to see if a company may have charged a recurring expense to its restructuring account 