Extraordinary Times

What we need to know about extraordinary items ?

Definition: extraordinary items

An extraordinary item : is an event or transaction that is considered abnormal , not related to ordinary company activities , and unlikely in the foreseeable future .

Why extraordinary items matter?

• to prevent "once-in-a-lifetime" events from skewing a company's regular earnings.
• to get a sense of what the company's "real" profitability was.
• We need consistent & comparable income reporting practices to avoid "promotional" information reported by companies.

The criteria for extraordinary items are as follows:

1. Unusual nature. The underlying event or transaction should possess a high degree of abnormality and be of a type clearly unrelated to the ordinary and typical activities of the company, taking into account the environment in which it operates.
2. Infrequency of occurrence. The underlying event or transaction should be of a type that the company does not reasonably expect to recur in the foreseeable future, taking into account the environment in which the company operates.