Unusual or Infrequent Items: IFRS vs. US GAAP

According to IFRS, nothing is extraordinary.

There used to be a classification of "extraordinary items" in income statements under US GAAP, but it was disallowed under IFRS. For periods after 15 December 2015, even US GAAP abandoned the classification. So it won't be an issue going forward. These items were considered both unusual and infrequent, but now such items are given a creative name: "unusual and infrequent." Why might companies want to separate out these certain items on the income statement?

No, all items on the income statement will affect net income.

Exactly. If there's some fire that got out of control, the company would want to list this loss separately, so that investors can think "ah, that probably won't happen again, so I can ignore that in estimating next year's earnings." The investors would probably want to do exactly that, which is why IFRS asks that these oddities be listed separately.

Not really; even if they are positive for the firm, the point is that they shouldn't be recurring things.

Maybe part of the business is sold at a loss. Perhaps debt is restructured, and there is a small gain. Many things can be considered unusual, infrequent, or both. If something happens this year, what would cause the item to be listed as extraordinary?

That's right.

No, remember that nothing is considered "extraordinary" as far as IFRS is concerned.

No, not anymore. GAAP doesn't recognize extraordinary items after December 2015.

You can't do that anymore. GAAP doesn't recognize extraordinary items after December 2015, and IFRS never did at all. These items are shown separately as part of continuing operations. A lot of unusual things can happen in business, but many possibilities can be anticipated to a degree; very little is truly extraordinary.

To summarize: [[summary]]

So that they don't affect net income

So they don't affect judgment of operating earnings

So that they can be highlighted as future opportunities

An accounting error

The item is judged to be unusual under IFRS

The item is judged to be unusual and infrequent under US GAAP

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