[thebusyone]

I think this question in the Becker FAR material is wrong, but what do you all think?

_________________________________________________________________________

Under U.S. GAAP, a material loss should be presented separately as a component of income from continuing operations when it is:

a. An extraordinary item.

b. A cumulative effect type change in accounting principle.

c. Unusual in nature and infrequent in occurrence.

d. Not unusual in nature but infrequent in occurrence.

_________________________________________________________________________

They say the correct answer is d. I have no idea why.

______________________
BEC - 4/4/11 - 83
REG - 1/4/12 - 82
AUD - 2/18/12 - 77
FAR - 5/31/12 ? 88
Ethics - 6/13/12 - 95

[Anonymous]

It is correct. It says it is a separate component of CONTINUING OPERATIONS. Extraordinary items (a) are not from continuing operations, and also (c) is the definition for extraordinary items. A cumulative effect type change for accounting principle (b) is corrected through beginning retained earnings. Since (d) is NOT unusual in nature but infrequent it is from continuing operations. For it to be extraordinary is needs to meet both criteria of unusual AND infrequent. It would be the same as when you list depreciation or interest expense separately under continuing operations.

[Anonymous]

Yea this stumped me at first too…but then I went back and looked at the book and realized I circled the “or” between Unusual or Infrequent on the Income statement line item under Income from continuing operations.

[thebusyone]

Thanks fellas!

______________________
BEC - 4/4/11 - 83
REG - 1/4/12 - 82
AUD - 2/18/12 - 77
FAR - 5/31/12 ? 88
Ethics - 6/13/12 - 95

[Author]

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