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Restructuring Charge

A restructuring charge is an expense a company records to cover the costs of reorganizing its operations, such as closing facilities, cutting jobs, or exiting business lines.

What Is a Restructuring Charge?

A restructuring charge is a cost that a company reports when it significantly changes how it runs its business. Companies take these steps for many reasons, including shrinking an unprofitable division, merging with another firm, moving production to cheaper locations, or simplifying an overly complicated organization. The charge gathers the expected expenses of these changes into a single line on the income statement, so investors can see them separately from the company's regular operating costs.

What Costs Are Included?

Restructuring charges often cover several types of expenses:

  • Severance and other payments to employees who are laid off
  • Lease termination fees or write-downs on closed facilities
  • Impairment of equipment, buildings, or intangible assets that will no longer be used
  • Contract cancellation costs and fees for moving operations
  • Consulting and advisory fees tied to the reorganization

Many companies also label these items as "special items" or "non-recurring items" in their earnings releases.

Why It Matters to Investors

Because a restructuring charge can be large, it can make a company's reported profit look much weaker in one period. Investors often look at operating income and earnings per share both with and without these charges to judge how the core business is performing. The key question is whether the restructuring will lower costs or improve results over time, and whether the company repeats such charges every year. When a business books restructuring charges quarter after quarter, some investors view them as a normal cost of doing business rather than a true one-time event.

How It Is Recorded

Under standard accounting rules, a company generally records a liability for restructuring costs when it commits to a plan and the obligation becomes reasonably certain. Costs that are not yet paid appear as a provision on the balance sheet until they are settled. Reviewing the notes to the financial statements can show how much was recorded, what it covers, and how much remains to be paid.

Updated October 23, 2026. For general education only; not financial, tax or legal advice.

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Related Terms

Operating Income

Operating income is the profit a company earns from its core business activities after paying operating costs, but before interest and income taxes are deducted.

Earnings Per Share (EPS)

Earnings per share is the portion of a company's profit allocated to each outstanding share of its common stock, calculated by dividing net income available to common shareholders by the weighted average number of shares outstanding.

Provision

A provision is an amount a company sets aside in its accounts to cover a probable future expense or loss whose timing or exact size is uncertain.

Balance Sheet

A balance sheet is a financial statement that lists a company's assets, liabilities, and shareholders' equity at a specific point in time, showing what it owns and owes.

Severance Pay

Severance pay is a payment an employer gives an employee when their employment ends, usually because of a layoff or dismissal, often in exchange for agreeing not to bring legal claims against the company.

Operating Expense (OpEx)

An operating expense is a cost a business incurs through its normal day-to-day activities to keep running, such as rent, salaries, utilities, and marketing, but not the direct cost of making goods.

Goodwill

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Write-Down

A write-down is an accounting reduction in the recorded value of an asset when its worth has fallen below its carrying value, recognized as an expense that lowers profit.