[FastFalcon]

Blue City has a major garage facility used by the Public Works department to maintain the streets and roads equipment. The garage was built 10 years ago and was expected to meet the city’s needs for 30 years. The City has been updating its equipment fleet and unexpectedly discovered that the service bays are no longer adequate for many of the new vehicles, which are much larger. The sudden obsolescence of the building has been evaluated as a significant, unusual, and infrequent occurrence that resulted from actions within management control. The impairment would be reported on the statement of activities as:
A. a program expense, temporary impairment.
Incorrect B. an extraordinary item.
C. a special item.
D. a program or operating expense.

The answer (as stated by NINJA) is that this qualifies as a special item under GASB “Both extraordinary and special items are defined as unusual and infrequent in nature. However, special items are significant transactions under management’s control”.
So frustrated because my becker book says verbatim “Special items are unusual or infrequent (BUT NOT BOTH) and are within the control of management.” GASB.org states “For the same reason, extraordinary and special items are presented apart from revenues and expenditures. Extraordinary items are increases or decreases in fund balance that are both (a) unusual in nature and (b) infrequent in occurrence. Extraordinary items, as their name implies, do not appear in the financial statements very often. Special items are either unusual or infrequent and are within the control of the government, whereas extraordinary items seldom are. A special item might be the proceeds from the sale of a capital asset for a government that does not commonly sell capital assets.”
The question clearly states that it is significant, unusual and infrequent. Why can’t they just test the mf rule and not some ambiguous nonsense?

[Painted_Jeans]

LMAO i just had in in the MCQ session and i was like wtf lol i said it was extraordinary item but hey they wanna make it special lol i agree this sh*t is stupid.
Let's hope the fact that you put it over here will make it stick!

[alloverit]

This is actually a fairly easy question. A & D are wrong as this is an impairment…not an expense. Choice B is wrong because an extraordinary item cannot be related to the ordinary course of business…which the parking garage is clearly related. Choice C is correct because it is infrequent, not expected to occur again but IS actually related to an event in the ordinary course of business.

[krstnam]

I don't know if this is right, but every time I see the word extraordinary I figure it's going to be wrong. It's an outdated accounting term. Companies used to have to report extraordinary items, – well they did when I was first doing accounting classes and I don't remember the details but there was some special way to handle those items. When I started taking the exam in 2016, I learned there wasn't any special reporting for it anymore and the term extraordinary was no longer used. Sometime after 2005 and before 2016, extraordinary got axed.

[alloverit]

@ Krstnam

GASB applies here. Extraordinary items were eliminated by FASB. They still exist under governmental accounting standards.

Still, you have a decent strategy and it would have worked on this question…though for the wrong reason, lol.

[Author]

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