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...

Individuals interested in reviewing the proposed 2015 US Generally Accepted Accounting Principles (GAAP) taxonomy from the Financial Accounting Standards Board (FASB) have until October 31 to submit their written comments....
A review of Financial Accounting Standards Board (FASB) guidance on share-based payment transactions found that the 2004 standard achieves its purpose and provides useful information to investors and other users of financial...
Continuing its efforts to simplify accounting procedures, the FASB has issued a proposed Accounting Standards Update on customer fees paid in a cloud computing arrangement. The newly-proposed update (Intangibles—...

Already a member? log in here.

Upcoming CPE Webinars

Sep 9
In this session we'll discuss the types of technologies and their uses in a small accounting firm office.
Sep 10
Transfer your knowledge and experience to prepare your team for the challenges and opportunities of an accounting career.
Sep 11
This webcast will include discussions of commonly-applicable Clarified Auditing Standards for audits of non-public, non-governmental entities.
Sep 24
In this jam-packed presentation Excel expert David Ringstrom, CPA will give you a crash-course in creating spreadsheet-based dashboards. A dashboard condenses large amounts of data into a compact space, yet enables the end user to easily drill down into details when warranted.