Extraordinary Items
Response to the following problem:
Generally accepted accounting principles identify two narrow criteria that must be met in order for an event or a transaction to be classified as an extraordinary item.
Required
1. Identify and explain each criterion.
2. Develop examples of events that might be extraordinary to one company but not extraordinary to another, such as:
a. An earthquake
b. A flood
c. A tornado
d. A severe frost
Justify your reasoning.
3. Explain how the following are reported on a company's income statement:
a. An extraordinary item
b. An event or a transaction that does not meet both criteria.