Under which of the following conditions would hurricane damage be considered an extraordinary item for income reporting purposes?
A) only if hurricanes in the geographical area are unusual in nature and occur infrequently
B) only if hurricanes are normal in the geographical area but do not occur frequently
C) only if hurricanes occur frequently in the geographical area but can be covered by insurance policies
D) under any circumstances hurricane damage should be classified as an extraordinary item

Question

Quizplus · Accepted Answer

According to accounting standards, an extraordinary item is a significant event or transaction that is both unusual in nature and infrequent in occurrence. Therefore, hurricane damage would be considered an extraordinary item for income reporting purposes only if hurricanes in the geographical area are unusual in nature and occur infrequently. If hurricanes are normal in the geographic area, then the damage they cause would be considered a normal business risk and not an extraordinary item. Similarly, if hurricanes occur frequently in the area but can be covered by insurance policies, then the damage they cause would not be considered an extraordinary item.

Under Which of the Following Conditions Would Hurricane Damage Be