FASB Finds Terrorist Costs Not Extraordinary

Costs and expenses from the September terrorist attack on the U.S. are not to be treated as an extraordinary item, a task force from the Financial Accounting Standards Board has ruled.

The decision was made in light of the prevailing economic conditions before the disaster. Task force member Dick Stock reportedly said that the downturn leading up to the atrocity, and the fact that the attack affected virtually every business, made the event "almost ordinary."

Earlier draft statements from FASB had come to the opposite conclusion. But a heated debate on the issues on Friday led to the belief that the Emerging Issues Task Force's (EITF) original interpretation of "extraordinary" was not applicable, after the problem became too complex to solve.

FASB stated: "At Friday's meeting the Task Force concluded that, while the events of September 11 were certainly extraordinary, the financial reporting treatment that uses that label would not be an effective way to communicate the financial effects of those events and should not be used in this case.

"The EITF observed that the economic effects of the events were so extensive and pervasive that it would be impossible to capture them in any one financial statement line item. Any approach to extraordinary item accounting would include only a part, perhaps a relatively small part, of the real effect. Readers of financial reports will be intensely interested in understanding the whole impact of the events on each company.

"The EITF concluded that showing part of the effect as an 'extraordinary item' would hinder, rather than help, effective communication."

Under the ruling, companies will have to register costs and expenses incurred as a result of the attack as part of normal business operations.

The decision is effective immediately. A copy of the decision will shortly be available on the FASB website. The original draft statement is available now.
 

You may like these other stories...

The prospect of International Financial Reporting Standards (IFRS) being fully adopted in the United States in the near future are growing less likely, as the Financial Accounting Standards Board (FASB) and the International...
The Financial Accounting Standards Board (FASB) last week finalized new accounting guidance on stock compensation – specifically on how to account for share-based payments, which is absent from current US Generally...
The chairman of the Financial Accounting Standards Board (FASB) hinted this week that a converged lease accounting standard with the International Accounting Standards Board (IASB) will probably not be issued this year....

Upcoming CPE Webinars

Jul 16
Hand off work to others with finesse and success. Kristen Rampe, CPA will share how to ensure delegated work is properly handled from start to finish in this content-rich one hour webinar.
Jul 17
This webcast will cover the preparation of the statement of cash flows and focus on accounting and disclosure policies for other important issues described below.
Jul 23
We can’t deny a great divide exists between the expectations and workplace needs of Baby Boomers and Millennials. To create thriving organizational performance, we need to shift the way in which we groom future leaders.
Jul 24
In this presentation Excel expert David Ringstrom, CPA revisits the Excel feature you should be using, but probably aren't. The Table feature offers the ability to both boost the integrity of your spreadsheets, but reduce maintenance as well.