Earnings that reflect a typical year are 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-off penalties, and fines. Examples of income that are adjusted in normalizing earnings include awards received, unusual and one-off projects, etc.