Crash Course in Accounting and Financial Statement Analysis, Second Edition

Nonrecurring Items

Some events that generate gains or losses that are not expected to recur are:

• Losses from natural disaster

• Losses from major corporate restructuring

• Income for legal settlement

• Asset write-downs

• Losses from discontinued operations

• Gains or losses from an accounting change

• Other

Whether nonrecurring items will be reported before or after net income carries important analytical implications.

Placement on the income statement depends on the nature and classification of the nonrecurring items.

Under GAAP, classification of nonrecurring items is broken down into four categories:

Unusual or Infrequent Items	reported pretax
Extraordinary Items	reported after-tax
Discontinued Operations	reported after-tax
Accounting Changes	reported after-tax