S&P changes system for examining earnings

S&P changes system for examining earnings reporting by Allen Wan
Ratings agency Standard & Poor's said it was changing its system for examining corporate earnings reporting to include charges such as options, restructuring costs, pension fund contributions and goodwill in order to reflect the true cost of doing business. S&P said it will start assessing a company's "core earnings," meaning the earnings generated from its basic business. It said that the inconsistency of earnings -- reflected in the way how companies define and calculate operating earnings -- has led to a loss of investor confidence. S&P said that it would start recalculating earnings of companies on the S&P 500 going back 10 years and planned to release the results starting from the end of the month. Based on a sample recalculation of earnings for high-profile companies such as General Electric (GE), Cisco (CSCO) and Tricon Global (YUM), S&P analysts said that they expect the PE ratios of companies to be higher and earnings growth to be less consistent.