FASB Eliminated Extraordinary Items

Hi everyone,

I am having some trouble distinguishing between:

  1. Extraordinary items, i.e. infrequent AND unusual


  1. Infrequent OR unusual items

Some of the examples I ran into for both items were:

Earthquake in Wisconsin, rarely happened before and thus qualifies as extraordinary.

The loss from frost damage to a Florida citrus crop is not that unsuaul, thus it is not extraordinary.

While the logic behind both examples is clear to me, I still feel as if theline is a bit blurry (I could see someone arguing that small earthquakes, barely noticable are actually not that infrequent and happen very often everywhere, the only difference for Wisconsin is the strength of the earthquake, which is unusual).

Apparently, the FASB also felt that this distinction is not quite clear and dispensed of extraordinary items, effective Dec 15th 2015.


Since IFRS does not allow to classify items as extraordinary, do you guys think we can ignore them alltogether for the upcoming exam, although it is still part of the curriculum?

And does anyone have a recommendation how to identify an extraordinary items in the exam questions? Are there typical hints that indicate what we are dealing with?



Hi ,

In Schweser , It is clearly mentioned that there are few companies that appears to be accident - prone and have losses which can be taken as "extraordinary " losses in a normal company BUT as there is a risk attached to the business itself that why we will consider it as unusual or infrequent item.

Example: In my country Agriculture companies suffer heavy losses due to unsystematic rainfall; sometimes there is too much rain resulting into flood and destroying crops and sometimes rainfall of few centimeters in a year resulting in drought, so there the loss will be taken as ususual or infrequent.

But now consider the current example of Dubai where just now there was so high rainfall which resulted into floods , There it was unimaginable that dubai can have such a rain. Therefore any losses from that flood will be taken as Extraordinary item

I remember that section in Schweser. Thank you for providing that example. So any indication in the question, that the event is completely out of the ordinary and typically never happens would be a sign of an extraordinary event.

I guess, I am just overthinking it, I am just worried that the example on the exam might not be such a clear cut case but rather ambigious.

I will keep your example in mind and use it as a blueprint.

Obvioiusly FASB did that in honor of my knee replacement surgery (or, perhaps, my birthday), which was that very same day.

Obviously, though my money is on the latter, I even believe I read something to that effect somewhere at the end of the document. They seemed pretty adamant to ensure that it becomes effective on that date, so that they only had to throw one party.

I have a colleague who read about 300 annual reports. I don’t think he found a single Extraordinary item - including Katrina. In practice, apparently, it’s a high bar to clear.

This will confuse but a real time example just now googled it Penguin Random House Posts Record Profit for 2015 Publishers Weekly-20 hours ago The company’s annual report also noted that revenue from PRH’s global … revenue rose 10.1% (1.7% when extraordinary items are excluded, … Margins at Lagardere Publishing, HarperCollins, and Houghton Mifflin Harcourt’s trade division all fell last year. EBIT rose by €1 million in 2015 over 2014 in Lagardere’s publishing group, while revenue rose 10.1% (1.7% when extraordinary items are excluded, such as the impact of foreign exchange)Fit Biotech Oy: Financial Statements Bulletin of FIT Biotech Oy Jan 1 … GlobeNewswire (press release)-10-Mar-2016 Operating profit excluding extraordinary items (remission of Tekes loans) was … Thecompany’s share of the funding is approximately 1 million euros, which will … The interim report for the half-year 2016 will be published on … JD.com’s revenue growth beats expectations

However, JD.com’s net losses ballooned to 7.6 billion yuan ($1.16 billion) in the last quarter, more than 16 times as much as a year earlier, which it blamed on impairment charges on its Paipai.com business. Excluding one-off and extraordinary items net losses were 656.2 million yuan.

They are many examples but dont know whats the criteria to seperate it

what I consider is something which is one-off .

I agree. I think the fact whether it is a one-off appears to be a very good indicator of extraordinary items. In fact in the curriculum (Reading 25, p147):

“Extraordinary items … are not expected to occur on an ongoing basis” (the term _ Force majeure _ comes to mind**)**

Which agrees with all of the examples above. So Katrina was not extraordinary because we can reasonably expect for it to happen again (since the area is prone to Hurricanes almost on an annual basis). A Hurricane in Paris or London on the other hand would be extraordinary, because if it actually happened at one point, we would not expect that to ever happen again (which is analogous to the Dubai vs India example provided by Ankit_Sharma above).

‘Impact of Foreign echange’ however I would only consider extraordinary if something happened to the exchange rate that is a really out of the ordinary and an outlier event. Say something that is outside of the standard confidence interval of daily fluctuations (maybe the case of the Swiss National Bank allowing free their exhange rate to free float a few years back).

It appears that there is quite some judgement involved in determining items as extraordinary, I can only hope that if it appears in the exam, it won’t be a borderline case.

It wont be Dont worry cool