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Posted by Mark Winiarski on Fri, Jan 30, 2015 @ 11:30 AM

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.

accountingUnder 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."

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.

Accounting Standards Update No. 2015-01, Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items addresses the difficulty and costs reported by stakeholders in applying current 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.

For further information about this change, please contact us.

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Mark WiniarskiMark Winiarski is a senior manager at CBIZ MHM in the Leawood office. He can be reached at 913.234.1656 or mwiniarski@cbiz.com.

 

 

 

 

 

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Tags: ASU, not-for-profit, FASB, Mark Winiarski

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