Going forward, items need only be considered unusual orinfrequent in order to qualify for separate reporting on the income statement.įASB believes this change will provide greater transparency and clarity in financial reporting while continuing to provide stakeholders useful information about non-ordinary items. Items that meet these requirements were segregated and reported separately in the income statement. Under GAAP, the concept of extraordinary items as a defined term includes the requirement that the extraordinary item be an event or transaction that is both unusual and infrequent. This change in terminology may have an impact upon a company’s incentive compensation plans and potential compliance with Internal Revenue Code 162(m) requirements as a performance plan and/or listing standards under a particular stock exchange. In effect, the term “extraordinary items” will disappear and no longer exist. The objective of this change by FASB is to simplify income statement presentation requirements in Subtopic 225-20 (Income Statement – Extraordinary and Unusual Items). The Financial Accounting Standards Board (FASB) has elected to eliminate the concept of extraordinary items under Generally Accepted Accounting Rules (GAAP), effective with fiscal years beginning after December 15, 2015.
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