As part of its efforts to simplify financial statement reporting, the Financial Accounting Standards Board (FASB) recently streamlined its treatment of extraordinary items. Entities will no longer have to separately classify, present and disclose extraordinary events or transactions. Under current practice in Subtopic 225-20, Income Statement — Extraordinary and Unusual Items, transactions or events are classified as extraordinary if: It has a “high degree of abnormality” and does not substantially relate to the entity’s usual activities. Its occurrence is infrequent and “cannot reasonably be expected to recur in the foreseeable future.”

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practice in order to determine if a transaction or event
is infrequent and unusual. Furthermore, stakeholders
called the practice unnecessary because users of
financial statements can identify extraordinary events
and transactions without separate classification and
presentation.
The update eliminates the extraordinary item
classification; however information about transactions
and activities previously meeting the extraordinary
item definition will still be included in the financial
statements, because the FASB retained the guidance
on items that are unusual or infrequently occurring.
Entities will be required to present transactions and
events that are unusual, infrequently occurring, or both
as separate components of continuing operations, or
to disclose those items in the notes to the financial
statements.
The update applies to all entities and affects fiscal
years and interim periods within fiscal years that
begin after December 15, 2015. Entities can adopt the
requirement early, so long as they apply the guidance
from the beginning of the fiscal year. Prospective
adopters must also include transition disclosures, if
applicable, about any items they include in income
from continuing operations that they previously
classified and presented as extraordinary items.
Retroactive adoption is available to all prior periods
that the entity presents in its financial statement.
If you have any specific questions, comments or
concerns, please share them with your local MHM
service professional.
As part of its efforts to simplify financial statement
reporting, the Financial Accounting Standards
Board (FASB) recently streamlined its treatment of
extraordinary items. Entities will no longer have to
separately classify, present and disclose extraordinary
events or transactions.
Under current practice in Subtopic 225-20, Income
Statement — Extraordinary and Unusual Items,
transactions or events are classified as extraordinary
if:
• It has a “high degree of abnormality” and does not
substantially relate to the entity’s usual activities.
• Itsoccurrenceisinfrequentand“cannotreasonably
be expected to recur in the foreseeable future.”
Transactions and/or events that meet the requirements
must be separated from the reporting of ordinary
operations in the income statement and net of tax,
after income from continuing operations. Entities
must disclose the extraordinary transaction, activity’s
income tax, and where applicable, present or disclose
its earnings-per-share data.
AccountingStandardsUpdateNo.2015-01,Simplifying
Income Statement Presentation by Eliminating the
ConceptofExtraordinaryItemsaddressesthedifficulty
and costs reported by stakeholders in applying current
January 2015
Extraordinary Item Requirements Eliminated