Correction
Keep a material unusual or infrequent item within continuing operations and present or disclose its nature and financial effects as required. Apply discontinued-operation guidance only to a disposed or held-for-sale component whose disposal represents a strategic shift with a major effect.
Why the mistake can seem reasonable
An unusual event may feel separate from the normal business. US GAAP eliminated the extraordinary-item category, however, and an event does not become a discontinued operation merely because it is rare, severe, or outside management's control.
Compare the evidence
For an unusual or infrequent item, examine the entity's ordinary activities, operating environment, and expected recurrence. For a discontinued operation, define the component, establish its disposal status, and evaluate the strategic shift and major effect. The two analyses answer different questions and can produce different income-statement and tax presentation.
When this mistake may appear
- A material casualty has no close local precedent.
- Management describes a closure as unusual or strategic.
Your work may contain this mistake if:
- Uses the extraordinary-item label.
- Nets an unusual item after tax outside continuing operations.
- Skips component, disposal, strategic-shift, and major-effect evidence.