The Financial Accounting Standards Board (“FASB”) has issued its first accounting standards update of 2015. Simply put, FASB wishes to inform preparers of financial statements that there is nothing special about the results they are reporting, i.e., the end of the concept of “Extraordinary Items” on Income Statements.
Accounting Standards Update No. 2015-01, Income Statement—Extraordinary and Unusual Items (Subtopic 225-20), Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items, explains the change. It is an amendment to the FASB Accounting Standards Codification, which in turn is the source of authoritative generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. An Accounting Standards Update is not authoritative; rather, it is a document that communicates how the Accounting Standards Codification is being amended. It also provides other information to help a user of GAAP understand how and why GAAP is changing and when the changes will be effective.
The amendment is effective for periods beginning after December 15, 2015, although early adoption is permitted. The new GAAP has the added benefit of more closely aligning with international standards (another FASB goal), as IAS 1, Presentation of Financial Statements, prohibits the presentation and disclosure of extraordinary items. This related article offers a more detailed discussion of this change in GAAP.