Extraordinary item
Encyclopedia of Business Terms and Methods, ISBN 978-1-929500-10-9. Copyright © 2011 by Marty J.Schmidt.Revised 12 January 2012.
The Meaning of Extraordinary Item (Extraordinary Gain, Extraordinary Loss)
An extraordinary item is a material expense or revenue item characterized by both its unusual nature and infrequency of occurrence. A company that is not in the real estate business, for instance, may report an extraordinary gain from selling a building.
On the income statement, extraordinary items are shown along with their income tax effects, separately from ordinary income, financial income, and income from discontinued operations. For a complete income statement with extraordinary items, see the encyclopedia entry income statement.
Extraordinary gains reported on the income statement often result from the sale of assets, such as land. Extraordinary losses typically result from re-structuring costs that go with laying off employees, or from losing law suits. In any case, extrordinary gains may in some cases incur a capital gains tax, whereas extraordinary losses may reduce reported taxable earnings, thereby brining a tax savings.
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