The October 15, 2002, issue of the Wall Street Journal included an article by Jesse Drucker titled “Motorola’s Profit: ‘Special’ Again?”

Instructions Read the article and answer the following questions.

(a) For how many consecutive quarters, including the quarter anticipated in the article, has Motorola reported a “special” item on its income statement? What is the total amount of these special charges over this period?

(b) What justification does Motorola give for reporting these charges as special items on its income statement, rather than reporting them as ordinary expenses?

(c) In the second quarter of 2002, what was Motorola’s pro forma income, and what was its net income according to generally accepted accounting principles (GAAP)?

(d) According to the article, do Wall Street analysts give more attention to GAAP income or pro forma income? Do analysts agree on how to treat special charges, such as those of Motorola?

INTERPRETING FINANCIAL STATEMENTS