Diluted Extraordinary
The Per-Share Impact of Extraordinary Items on Diluted EPS (Historical Concept)
Diluted Extraordinary refers to the component of diluted earnings per share (EPS) attributable to extraordinary items—events that were both unusual in nature and infrequent in occurrence. This line item isolated the after-tax, per-share effect of such rare events on fully diluted EPS. However, under US GAAP, the concept of extraordinary items was officially eliminated in 2015 (ASU 2015-01), meaning this category no longer appears in modern financial statements. It remains relevant only for historical analysis of pre-2015 periods.
What Were Extraordinary Items?
Under pre-2015 US GAAP (APB Opinion 30), extraordinary items were events and transactions that were both: - Unusual in nature: Abnormal and unrelated to ordinary business activities. - Infrequent in occurrence: Not reasonably expected to recur in the foreseeable future.
Examples included losses from natural disasters (e.g., major earthquakes in non-seismic areas), expropriation of assets by foreign governments, or one-time effects of new laws. These were reported separately, net of tax, below income from continuing operations to avoid distorting core performance.
The Diluted Extraordinary line showed the per-share impact of these items using diluted shares, ensuring conservative presentation.
Why Were Extraordinary Items Eliminated?
In January 2015, the FASB issued ASU 2015-01 as part of its Simplification Initiative, eliminating the extraordinary items classification. Reasons included:
Key Reasons for Elimination
- Rarely used in practice—very few events met both strict criteria.
- Subjective judgment led to inconsistent application.
- Users found the distinction unhelpful; preferred management disclosures in footnotes.
- Reduced complexity in financial reporting.
Post-2015, events previously considered extraordinary are now included in income from continuing operations (often as unusual or infrequent items) and disclosed separately in footnotes if material.
IFRS never had a separate extraordinary items category, prohibiting its use entirely.
Historical Calculation
Extraordinary items were always shown net of tax, and their EPS effect was calculated separately from continuing and discontinued operations.
Historical Examples
Example 1: Natural Disaster
Example 2: Government Expropriation
Today, these events would be included in operating or non-operating income and disclosed in MD&A or footnotes.
Importance in Modern vs. Historical Analysis
In current financial analysis (post-2015), this line is always zero. Events once classified as extraordinary are now part of pretax income and often adjusted out in non-GAAP normalized earnings.
For historical analysis of pre-2015 data: - Helps explain large EPS swings - Allows accurate comparison of core operating performance across periods - Should be excluded when calculating normalized or recurring EPS
Warning: Misinterpreting pre-2015 extraordinary items as part of ongoing operations can distort trend analysis.
Key Takeaways
Diluted Extraordinary showed the per-share impact of rare, unusual, and infrequent events on diluted EPS.
Eliminated from US GAAP in 2015 via ASU 2015-01 to simplify reporting.
No longer appears in modern income statements or EPS reconciliations.
Post-2015, similar events are included in continuing operations with footnote disclosure.
Relevant only for analyzing historical financial data before 2015.
Diluted Extraordinary
The Per-Share Impact of Extraordinary Items on Diluted EPS (Historical Concept)
Diluted Extraordinary refers to the component of diluted earnings per share (EPS) attributable to extraordinary items—events that were both unusual in nature and infrequent in occurrence. This line item isolated the after-tax, per-share effect of such rare events on fully diluted EPS. However, under US GAAP, the concept of extraordinary items was officially eliminated in 2015 (ASU 2015-01), meaning this category no longer appears in modern financial statements. It remains relevant only for historical analysis of pre-2015 periods.
Table of Contents
What Were Extraordinary Items?
Under pre-2015 US GAAP (APB Opinion 30), extraordinary items were events and transactions that were both: - Unusual in nature: Abnormal and unrelated to ordinary business activities. - Infrequent in occurrence: Not reasonably expected to recur in the foreseeable future.
Examples included losses from natural disasters (e.g., major earthquakes in non-seismic areas), expropriation of assets by foreign governments, or one-time effects of new laws. These were reported separately, net of tax, below income from continuing operations to avoid distorting core performance.
The Diluted Extraordinary line showed the per-share impact of these items using diluted shares, ensuring conservative presentation.
Why Were Extraordinary Items Eliminated?
In January 2015, the FASB issued ASU 2015-01 as part of its Simplification Initiative, eliminating the extraordinary items classification. Reasons included:
Key Reasons for Elimination
- Rarely used in practice—very few events met both strict criteria.
- Subjective judgment led to inconsistent application.
- Users found the distinction unhelpful; preferred management disclosures in footnotes.
- Reduced complexity in financial reporting.
Post-2015, events previously considered extraordinary are now included in income from continuing operations (often as unusual or infrequent items) and disclosed separately in footnotes if material.
IFRS never had a separate extraordinary items category, prohibiting its use entirely.
Historical Calculation
Extraordinary items were always shown net of tax, and their EPS effect was calculated separately from continuing and discontinued operations.
Historical Examples
Example 1: Natural Disaster
Example 2: Government Expropriation
Today, these events would be included in operating or non-operating income and disclosed in MD&A or footnotes.
Importance in Modern vs. Historical Analysis
In current financial analysis (post-2015), this line is always zero. Events once classified as extraordinary are now part of pretax income and often adjusted out in non-GAAP normalized earnings.
For historical analysis of pre-2015 data: - Helps explain large EPS swings - Allows accurate comparison of core operating performance across periods - Should be excluded when calculating normalized or recurring EPS
Warning: Misinterpreting pre-2015 extraordinary items as part of ongoing operations can distort trend analysis.
Key Takeaways
Diluted Extraordinary showed the per-share impact of rare, unusual, and infrequent events on diluted EPS.
Eliminated from US GAAP in 2015 via ASU 2015-01 to simplify reporting.
No longer appears in modern income statements or EPS reconciliations.
Post-2015, similar events are included in continuing operations with footnote disclosure.
Relevant only for analyzing historical financial data before 2015.
Related Terms
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