[cpaflready]

Am I correct in assuming that since my test is next month that the correct answer to the following question will change to D, or will extraordinary items not be tested at all?

In 20X1, Teller Co. incurred losses arising from its guilty plea in its first antitrust action, and from a substantial increase in production costs caused when a major supplier’s workers went on strike. Which of these losses should be reported as an extraordinary item?

Correct A.

Antitrust action

B.

Production costs

C.

Both antitrust action and production costs

D.

Neither antitrust action nor production costs

You are correct, the answer is A.

FASB ASC 225-20-45-2 defines extraordinary items as “events and transactions that are distinguished by their unusual nature and by the infrequency of their occurrence.”

The loss from the antitrust suit was a first for Teller. FASB ASC 225-20-45 mentions government regulation in discussing “unusual nature.” That loss should be reported as an extraordinary item.

The increase in production costs should not be reported as an extraordinary item. FASB ASC 225-20-45 contains a listing of several items not considered extraordinary. Among them are the effects of a strike, including those against competitors and major suppliers.

NOTE: Update 2015-01 eliminates the concept of extraordinary items, to be tested 10/15.

cpaflready