ASC

ASC 220-20

Unusual or Infrequently Occurring Items

220 Income Statement—Reporting Comprehensive Income

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In brief

IntroductoryPresentationDisclosureFinancial statement presentationIncome taxes

ASC 220-20 governs how an entity presents and discloses material events or transactions that are unusual in nature, infrequent in occurrence, or both. Such items must be reported as a separate component of income from continuing operations, with their nature and financial effects either shown on the face of the income statement or disclosed in the notes (220-20-45-1; 220-20-50-1). They may not be presented net of tax on the face of the income statement, and their per-share effects may not be shown there.

Key points (7)
  • A material event or transaction of an unusual nature or of a type indicating infrequency of occurrence (or both) shall be reported as a separate component of income from continuing operations (220-20-45-1).
  • The nature and financial effects of each such event or transaction must be either presented as a separate component of income from continuing operations or disclosed in the notes (220-20-45-1; 220-20-50-1).
  • Gains or losses of a similar nature that are not individually material shall be aggregated (220-20-45-1).
  • Such items shall not be reported on the face of the income statement net of income taxes, and their EPS effects shall not be presented on the face of the income statement (220-20-45-1).
  • Unusual nature is judged against the entity's own environment—industry, geography, and governmental regulation—so an item may be unusual for one entity but not another; being beyond management's control does not by itself establish unusual nature (220-20-55-1).
  • An event or transaction of a type not reasonably expected to recur in the foreseeable future occurs infrequently; past occurrence is evidence of the probability of recurrence (220-20-55-2).
  • Interim period income taxes on significant unusual or infrequently occurring items are computed under paragraphs 740-270-30-8 through 30-12 (220-20-60-1); a pending amendment extends the disclosure to interim financial statements (transition guidance 270-10-65-1).

For students. Since the FASB eliminated the "extraordinary items" category, these items stay inside income from continuing operations—a common exam trap is showing them below the line or net of tax with an EPS figure, both of which 220-20-45-1 forbids. Remember the unusual/infrequent assessment is entity- and environment-specific, not absolute.

unusual natureinfrequency of occurrenceincome from continuing operationsseparate component presentationnote disclosureentity environmentnet-of-tax prohibitionearnings per share effects

Machine-generated study aid for ASC 220-20. Check the source paragraphs below.

220-20-00Status

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220-20-05Overview and Background

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220-20-05-1
This Subtopic addresses the presentation and disclosure of unusual and infrequently occurring items.

220-20-15Scope and Scope Exceptions

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Overall Guidance

220-20-15-1
The guidance in this Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 220-10-15.

220-20-45Other Presentation Matters

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Presentation of Unusual or Infrequently Occurring Items

220-20-45-1
A material event or transaction that an entity considers to be of an unusual nature or of a type that indicates infrequency of occurrence or both shall be reported as a separate component of income from continuing operations. The nature and financial effects of each event or transaction shall be presented as a separate component of income from continuing operations or, alternatively, disclosed in notes to financial statements (see paragraph 220-20-50-1). Gains or losses of a similar nature that are not individually material shall be aggregated. Such items shall not be reported on the face of the income statement net of income taxes. Similarly, the EPS effects of those items shall not be presented on the face of the income statement.

220-20-50Disclosure

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Unusual or Infrequently Occurring Items

220-20-50-1
The nature and financial effects of each event or transaction that is unusual in nature or occurs infrequently or both shall be presented as a separate component of income from continuing operations or, alternatively, disclosed in notes to the financial statements.
Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance:
270-10-65-1The nature and financial effects of each event or transaction that is unusual in nature or occurs infrequently or both shall be presented as a separate component of income from continuing operations or, alternatively, disclosed in notes to the interim and annual financial statements.

220-20-55Implementation Guidance and Illustrations

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Implementation Guidance

220-20-55-1
The specific characteristics of the entity, such as type and scope of operations, lines of business, and operating policies should be considered in determining ordinary and typical activities of an entity. The environment in which an entity operates is a primary consideration in determining whether an underlying event or transaction is abnormal and significantly different from the ordinary and typical activities of the entity. The environment of an entity includes such factors as the characteristics of the industry or industries in which it operates, the geographical location of its operations, and the nature and extent of governmental regulation. Thus, an event or transaction may be unusual in nature for one entity but not for another because of differences in their respective environments. Unusual nature is not established by the fact that an event or transaction is beyond the control of management.
220-20-55-2
For purposes of this Subtopic, an event or transaction of a type not reasonably expected to recur in the foreseeable future is considered to occur infrequently. Determining the probability of recurrence of a particular event or transaction in the foreseeable future should take into account the environment in which an entity operates. Accordingly, a specific transaction of one entity might meet that criterion and a similar transaction of another entity might not because of different probabilities of recurrence. The past occurrence of an event or transaction for a particular entity provides evidence to assess the probability of recurrence of that type of event or transaction in the foreseeable future.
220-20-55-3
The following are illustrative of events or transactions that are unusual in nature or occur infrequently:
  1. a
    A large portion of a tobacco manufacturer's crops are destroyed by a hail storm. Severe damage from hail storms in the locality where the manufacturer grows tobacco is rare.
  2. b
    A steel fabricating entity sells the only land it owns. The land was acquired 10 years ago for future expansion, but shortly thereafter the entity abandoned all plans for expansion and held the land for appreciation.
  3. c
    An earthquake destroys one of the oil refineries owned by a large multinational oil entity.

220-20-60Relationships

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Income Taxes

220-20-60-1
For guidance on the computation of interim period income taxes applicable to significant unusual or infrequently occurring items, see paragraphs
740-270-30-8 through 30-12
.

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