Extraordinary items - update from the FASB

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Swissfox

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Hi,
I was struggling with the concept of extraordinary item so I wanted to check something online when I saw this article: http://www.journalofaccountancy.com/news/2015/jan/gaap-extraordinary-items-201511630.html
This article is stating that there is no more extraordinary item for US-GAAP. In the e-book from the CFAI, I grasped the following concept of extraordinary item:
For US-GAAP, an extraordinary item is an item that is both infrequent and unusal. This terminology doesn’t exist under IFRS (they don’t allow an item to be recorded as extraordinary, i.e. both unusual and infrequent). Please correct me if I’m wrong.
Is it possible that the CFAI didn’t mention this update in the curriculum? I check and I have the latest e-book so I’m a bit confused now.
Your help would be much appreciated.
Thanks
 
The first page of some chapters makes a disclosure about the data contained in the chapter, “this could be outdated, and is not responsability of the candidate to necessarily know the up-to-date info”. Clearly you found a difference in the CFAI curriculum and current norms, so I think CFAI knows this and the exam will surely not ask nothing about this. Just my opinion.
 
Swissfox wrote:
Hi,
I was struggling with the concept of extraordinary item so I wanted to check something online when I saw this article: http://www.journalofaccountancy.com/news/2015/jan/gaap-extraordinary-items-201511630.html
This article is stating that there is no more extraordinary item for US-GAAP. In the e-book from the CFAI, I grasped the following concept of extraordinary item:
For US-GAAP, an extraordinary item is an item that is both infrequent and unusal. This terminology doesn’t exist under IFRS (they don’t allow an item to be recorded as extraordinary, i.e. both unusual and infrequent). Please correct me if I’m wrong.
Is it possible that the CFAI didn’t mention this update in the curriculum? I check and I have the latest e-book so I’m a bit confused now.
Your help would be much appreciated.
Thanks
Click to expand...
You are not wrong. Extraordinary items existed even in IFRS a decade ago. This category was removed because of financial reporting manipulation. Since global GAAPs are getting harmonized, it’s not unlikely that FASB would also consider removal of this category in USGAAP (SFAS).
For this exam purpose according to USGAAP requirements you may consider extraordinary items (loss/gains) as items which are not caused by regular operations than happened under various other circumstances as earthquake, fire, flood or simillar. Also income from eg. sales business units or fixed assets in one period that has no intention of appering in another reporting period can be considered as an extraordinary income. It is important to notice that this kind of items in financial statements requiring statutory disclosure in FS notes.
 
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