In accounting terms, an extraordinary item is defined as non-recurring event that materially affected a company’s finances in a reporting period. An explanation of the item must be provided in a company?s annual or quarterly report.
Entries classified as extraordinary are shown on the income statement net of tax effects and after a subtotal income before extraordinary items.
At a meeting on September 20, the FASB had tentatively concluded that some losses, precipitated by the events of September 11, should be shown as extraordinary and began efforts to clarify what losses should fall into this category.
However at a later meeting it was decided that extraordinary item treatment should not be used.
The FASB?s Emerging Issues Task Force took the view that the far-reaching effects of the attacks, coupled with an already weakening economy, would make capturing the resulting economic effects in companies’ financial statements problematic (see FASB Task Force Focuses on Attack Impact ).
Further, the economic effects of the events were so extensive and pervasive that it would be impossible to capture them in any one financial statement line item and that showing any part of the effect as an extraordinary item would hinder, rather than help effective communication.
The Financial Accounting Standards Board establishes standards of financial accounting and reporting. Those standards govern the preparation of financial reports and are officially recognized as authoritative by the Securities and Exchange Commission and the American Institute of Certified Public Accountants.
– Camilla Klein email@example.com