DEFINITION of Excluding Items
Excluding items refers to the common practice of leaving certain factors out of an overall calculation to remove the volatility that might otherwise impact its comparability or distort long-term forecasting. Excluding items often refers to items removed from the calculation of some earnings per share numbers. Such items may include one-time items, extraordinary expenses or income.
BREAKING DOWN Excluding Items
The practice of excluding items is also common in the calculation of indices. For example, the Consumer Price Index (CPI) is commonly reported excluding two highly-volatile items — food and energy prices — to obtain the so-called "core inflation" index. The Bureau of Labor Statistics (BLS) began producing versions of the CPI excluding food and energy since the late 1950s, when those series first appeared in the annual Economic Report of the President. “CPI ex food and energy” first appeared in the report in 1980. Many national statistical agencies produce similar inflation measures, and many central banks refer to these measures as guides for monetary policy.
Items Excluded from the GDP
The Gross Domestic Product (GDP), which represents a nation's total production within its domestic borders, provides another example of the practice of excluding items. GDP is the sum of consumption, investment, government purchases along with exports minus imports, but many things are not included in the GDP. Here are a few examples: Sales of goods that are produced outside domestic borders; sales of used goods; illegal sales of goods and services (the black market); transfer payments made by the government; and intermediate goods that are used to produce other products.