extraordinary item

Extraordinary item

An unusual and unexpected one-time event that must be explained to shareholders in an annual or quarterly report, e.g., write down for a discontinued operation, employee fraud, a lawsuit, or other one-time events. Results are often presented with and without these items. The logic of excluding these items is that investors have a better notion of future performance if one-time events are excluded. Differs from an unusual item in that extraordinary items are (1) material; (2) non-recurring; and (3) outside the ordinary nature of the business.

Extraordinary Item

A large gain or loss in a company's earnings due to a non-recurring event that is out of the company's control. For example, a water distribution company may have unusually high earnings from sales because a natural disaster required relief organizations to purchase large quantities of clean water. On the other hand, it may have low earnings from sales because all the relief organizations had previously stocked up on water and did not need to buy any more. Extraordinary items are reported separately from the company's other financial statements so as to give a clearer picture of how the company is actually performing. Publicly-traded companies must report extraordinary items to shareholders in quarterly and annual reports and explain why they do not constitute a substantial increase or decrease in the company's health.

extraordinary item

An infrequently occurring transaction or event that, if material, is reported separately from continuing operations.
References in periodicals archive ?
While ASC 225-20 is not superseded as of the writing of this article, the board has moved one step closer to permanently eliminating extraordinary item reporting.
The extraordinary item still appears on some companies' income statements, but its much less common than it used to be, largely because of FASB Statement no.
Net income, however, after an extraordinary item, was $1.
First, when working on various examples to illustrate what would qualify for extraordinary item treatment, Lucas says, "We came to the conclusion that no matter what we did, the extraordinary item would never be able to capture what really was the direct effect of this unprecedented event.
AFTER TWO WEEKS OF BACK-AND-FORTH DELIBERATIONS AT THE END OF SEPTEMBER, members of the Emerging Issues Task Force (EITF) of the Financial Accounting Standards Board (FASB) decided against use of an extraordinary item treatment for losses incurred in connection with the September 11 terrorist attacks.
30 defines an extraordinary item as one which is both unusual in nature and infrequent in occurrence.
Often there was little, if any, disclosure of what constituted an extraordinary item, and accountants tended to view these in a "rather liberal" manner (Weldon Powell, "Extraordinary Items," Journal of Accountancy, January 1966).
IASB's justification for the proposed change is similar to FASB's Emerging Issue Task Force's (EITF) not permitting extraordinary item treatment for losses and costs from the September 11, 2001, terrorist attacks.
A company that does not report a discontinued operation but reports an extraordinary item or cumulative effect of an accounting change should report basic EPS for net income before extraordinary items or net income before accounting change and net income on the face of the income statement.
The income before extraordinary item for the quarter was $59,000 compared to a loss before extraordinary item of $204,000 for the same period in 2003.

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