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Taking the "Extra" Out of the Extraordinary
By Nina Hurley, CPA, Senior Associate, Johnson Lambert LLP
Extraordinary items mean extra work, extra disclosures, and extra confusion for financial statement preparers. Well, not anymore! Effective for fiscal years beginning after December 15, 2015, special treatment for extraordinary items will be eliminated.
Although segregating extraordinary items on the face of the financial statements and disclosures was intended to create transparency, financial statement users noted that segregation is unnecessary to identify such items.
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Further, extraordinary items are extremely difficult to define, essentially, an item is extraordinary if it is not ordinary, making classification and disclosure more obscure than clear for financial statement preparers and auditors.
What does this mean for financial statement preparers? All items will flow through the financial statements as ordinary. Only certain items formerly known as extraordinary may still be disclosed, such as major transactions or business plan changes.
This change brings GAAP in line with international standards. The update may be applied prospectively or retrospectively and early adoption is permitted. Hopefully this change will make things much easier for financial statement preparers!
For more information, contact Nina Hurley at email@example.com or (802)383-4827.
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