Restructuring charge definition

What is a Restructuring Charge?

A restructuring charge is a large one-time write-off taken by a business in contemplation of a reorganization. The charge is taken in advance in order to take a one-time "hit" for the full amount of all expected reorganization costs, after which there should be no additional charges. Examples of the costs that may be considered when compiling this charge are employee layoffs, the sale of assets, and shifting assets to new locations.

Disadvantages of a Restructuring Charge

Restructuring charges can be taken too far, where the charge is inflated in order to create a "piggy bank" expense reserve that can be used to offset ongoing operating expenses, thereby inflating reported profits. The result can be a spike in a company’s share price.