When will extraordinary items be tested on CPA Exam?

The concept of extraordinary items was dropped from U.S. GAAP by the FASB on Jan. 9, 2015, as a result of the adoption of Accounting Standards Update (ASU) No. 2015-01, Income Statement — Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items.

Accountants and other financial professionals had informed the FASB that the concept of extraordinary items was unclear and created confusion among corporate controllers and their auditors. Additionally, the board stated that the extraordinary item category wasn’t needed by investors or creditors.

“Eliminating the concept of extraordinary items will save time and reduce costs for preparers because they will not have to assess whether a particular event or transaction event is extraordinary,” the FASB said in ASU No. 2015-01.

The Board does not foresee a loss of reporting information because the presentation and disclosure guidance for items that are unusual in nature or occur infrequently will be retained and expanded to include items that are both unusual in nature and infrequently occurring. ASU No. 2015-01 will result in a closer alignment of U.S. GAAP income statement presentation guidance with IAS 1, Presentation of Financial Statements, which prohibits the presentation and disclosure of extraordinary items.

The amendments in ASU No. 2015-01 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amendments prospectively or retrospectively. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption.

Due to early implementation, ASU No. 2015-15 will become testable on the CPA Exam six months after its issue date, in the October-November 2015 test window.

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