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By Denise Lugo
Jan. 9 — The Financial Accounting Standards Board issued a new Accounting Standards Update Jan. 9, 2015, as a part of its Simplification Initiative, to eliminate the concept of extraordinary items from U.S. generally accepted accounting principles (GAAP).
The guidance also eliminates the requirements that companies separately present extraordinary items in the income statements and disclose them in the footnotes. Extraordinary items were those that were clearly abnormal in nature and that occurred only very infrequently. Such items were required to be presented separately from an entity's ordinary operations.
Entities would still, however, be required to present and disclose an event that is either unusual in nature or infrequent in occurrence, FASB said.
The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after Dec. 15, 2015 for both public and private companies.
FASB issued the guidance as ASU No. 2015-01, Income Statement—Extraordinary and Unusual Items (Subtopic 225-20), Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items.
Companies are allowed a choice on how to apply the guidance, the ASU indicates. Specifically, they may apply the amendments either prospectively or retrospectively. They are also allowed to early adopt the guidance, provided that it is applied from the beginning of the fiscal year of adoption.
However, should a company chose to prospectively adopt the guidance, a transitional disclosure would be required, the ASU states.
The guidance stems from FASB's simplification initiative and is expected to save time and reduce costs for companies, while the stakeholders have said that it is rare for an event or transaction to meet the requirements to be presented as an extraordinary item.
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For a copy of the ASU, go to http://www.fasb.org/cs/ContentServer?c=Document_C&pagename=FASB%2FDocument_C%2FDocumentPage&cid=1176164695031.
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