Could someone please explain why B is the answer? I know A is only for IFRS, but I am not sure what’s wrong with B. Thank you!
Which of the following statements about types of nonrecurring items under U.S.GAAP is least accurate?
A. Unusual or infrequent items are included in income from continuing operations.
B. Extraordinary items are unusual and infrequent items that are reported net of taxes and included in nonrecurring income from continuing operations. (Answer)
C. Discontinued operations are reported net of taxes below income from continuing operating.
As per US GAAP, an extraordinary item has both unusual and infrequent items, however, they appear below the discontinued operations and are not included in income from continuing operations.
So what you’re saying is that income from continuing operations = nonrecurring income from continuing operations?
Also, does this mean the reason why unusual or infrequent items under IFRS is a part of a company’s continuing operations is that it’s recorded above income from continuing operations?
unusual or infrequent items may be included as part of a Company’s continuing operations, however unusual and infrequent items do not form a part of continuing operations.
The probability of “unusual or infrequent” event happening is small, however is still possible, example goods getting destroyed in rains in an area which receives a moderate rainfall.
However, “unusual and infrequent” events are those whose occurrence is extremely rare, thus this items should not form a part of continuing operations because there is a HUGE possibility that these items may never get repeated because of its nature of being both, unusual and infrequent, thus it is not being included in continuing operations, example, goods getting destroyed in floods in a drought prone area.
