Earnings that reflect a typical year is considered “normalized” earnings. Every year brings surprises. If these surprises are random one-off events that are not likely to occur, it is considered abnormal and removed to reflect the earnings in a normal year.
Events considered abnormal and removed to normalize earnings may be positive (income) or negative (expenses) events.
Examples of events that need normalization:. Examples of expenses that are adjusted in normalizing earnings include litigation fees, unusual discretionary expenses, one of penalties and fines. Examples of income that are adjusted in normalizing earnings include awards received, unusual and one of projects, etc.