FASB Update: Simplifying Income Statement Presentation
On January 9, 2015, the FASB issued ASU [Accounting Standards Update] 2015-01, Income Statement—Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. The ASU eliminates the concept of extraordinary items and the uncertainty in determining when an item is both unusual in nature and infrequent in occurrence.
Presently, an event or transaction is presumed to be ordinary activity unless evidence supports the transaction as unusual in nature and infrequent in occurrence. If an event or transaction is determined to be unusual and infrequent, it is deemed to be extraordinary, and is required to be segregated from the results of ordinary operations on the face of the income statement, net of tax, after income from continuing operations, along with other financial statement disclosures.
ASU 2015-01 eliminates the concept of extraordinary items from the income statement presentation. Eliminating this concept removes the uncertainty in determining when a transaction is both unusual in nature and infrequent in occurrence and saves the related time and costs of documenting and assessing this evaluation by financial statement prepares and external accountants, auditors and regulators. However, the presentation and disclosure guidance for items that are unusual in nature OR occur infrequently will be retained and will be expanded to include items that are both unusual in nature and infrequently occurring.
This ASU aligns US GAAP with IAS 1, which prohibits presentation and disclosure of extraordinary items.
This ASU is effective for years beginning after December 15, 2015, with earlier application permitted.