Generally accepted accounting principles identify two narrow criteria that must be met in order for an event or a transaction to be classified as an extraordinary item.
Required:
1. Identify and explain each criterion.
2. Develop examples of events that might be extraordinary to one company but not extraordinary to another, such as:
a. An earthquake
b. A flood
c. A tornado
d. A severe frost
Justify your reasoning.
3. Explain how the following are reported on a company's income statement:
a. An extraordinary item
b. An event or a transaction that does not meet both criteria