In accounting, report abnormal or infrequent gains or losses in the company’s annual report as nonrecurring items. They are rare events or activities that are not part of the company’s normal business operations. They may also be called extraordinary items. You must disclose the details of any extraordinary items in a footnote in the company’s financial statements.
Extraordinary items can distort a company’s earnings. Therefore, analysts will often prepare a pro forma income statement, excluding the effects of the extraordinary items, to see what the company’s financial performance would’ve looked like without the distortion of the abnormal occurrence.
Nonrecurring Items Examples
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