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Extraordinary items are events or transactions which are unusual in nature and do not occur frequently. Gains and losses from disposal of plant assets or selling investments do not qualify as extraordinary because they are considered to be normal business activities. Two distinct approaches are used for extraordinary items. The all-inclusive theory recommends that both ordinary and extraordinary items be included in the income statement; it is the most commonly followed. The current operating performance theory recommends that only normal, ordinary, and recurring items be listed on the income statement, and extraordinary items be shown in retained earnings.
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