Earnings quality: The ability of current period income (also referred to as "earnings") to predict a company's future income.
Permanent earnings: Generated from operations that are expected to produce similar earnings in the future (e.g., Apple's earnings from its iPhone sales).
Temporary earnings: Generated from transactions that are NOT expected to generate similar profits in the future (e.g., Apple sells a manufacturing facility for a gain).
The application of accounting rules often requires assumptions, judgments, and estimates.
As a result, a company's CEO and CFO have the ability to increase or decrease income by modifying their assumptions, judgments, and estimates.
It is possible for them to do this in an opportunistic way.
Companies CEOs and CFOs sometimes try to move operating expenses into non-operating expenses.
Why?
Doing so allows them to show stronger operating income. Operating income is generally more important to shareholders than non-operating income.