Unusual Item

What is an Unusual Item?

An unusual thing is a nonrecurring or one-time gain or loss that isn't viewed as part of normal business operations. Unusual gains or losses might be recorded on the income statement as a separate component of income from continuing operations, or on the other hand, might be recognized in the footnotes to the financial statements or the management discussion and analysis (MD&A) section of the annual report.

Grasping Unusual Items

Reporting unusual things separately is important to guarantee the transparency of financial reporting. Since unusual things are probably not going to repeat, isolating these things — either unequivocally on a income statement or in the management discussion and analysis (MD&A) or footnotes — permits investors to better survey the income-creating capacity of the core business activities.

Unusual things might include:

• restructuring charges comprehensive of severance pay and factory closings
• asset impairment charges or discounts
• losses from discontinued operations
• losses from exiting the workforce of debt
• M&A or divestiture- related costs
• gains or losses from sale of assets
• gains or losses from a claim
• damage costs or lull of operations due to a natural catastrophe
• charges coming from changes in accounting strategy

The Financial Accounting Standards Board (FASB), the independent nonprofit organization responsible for giving generally accepted accounting principles (GAAP), has given management slack to give a more descriptive separate detail on the income statement when suitable, for example, "Loss from Hurricane Damages to Office Building."

Special Considerations

The treatment of unusual things has several ramifications connected with the analysis of company performance and valuation of its shares, credit agreements, and executive compensation schemes. An analyst would need to make changes in accordance with the income statement to deliver a "clean" EBIT, EBITDA, and net income figures on which to compute price multiples. Debt agreements would need to determine the avoidances to how certain contracts are calculated. Executive pay plans, too, would have to make sense of how unusual things are taken care of in compensation recipes.