Financial reporting treatment of analysis of special items

Non-recurring items (33)

Definition: A gain or loss found on a company’s income statement that is not expected to occur regularly.

Discontinued operation (34)
- Operations of a business which have been abandoned, sold, or else wise disposed of.
- Decided to dispose but not done yet
- The business must be physically and operationally distinct from the rest of the team
Measurement date (35)
- When the company develops plan for disposing of an operation
Phase out period (36)
- Time between measurement period and actual disposal date
Income statement
- Income or loss from discontinued operations is reported separately from continuing statement in income statement
- Any past income statement must be restarted, separating income or loss from discontinued operations
- On measurement date:
  - Estimate any loss in phaseout period and loss on sales of business
  - Any expected gain is not reported until after sale complete

Analytical implications
- Discontinued operation
  - Do not affect net income from continued operations
  - Is excluded when forecast future earnings
Unusual or infrequent items (34)

Examples
- Gain or loss from sales of assets if these activities are not firm’s ordinary operation
- Impairment and restructuring cost
Financial report:
- Included in income from continuing operations
- Analytical implications
  - Affect net income from continuing operations
  - Need to review if this item should be included when forecasting future firm earnings
Extraordinary items (35)