CFA Level I · CFA Level I Exam · Analyzing Income Statements
Which treatment is most likely required under IFRS for an item of income or expense that is unusual or infrequent in nature?
Under IFRS, unusual or infrequent items stay within profit or loss and are separately disclosed when material. IFRS prohibits presenting any item as extraordinary, and such items are not moved directly to equity. Separate disclosure lets analysts adjust earnings when assessing sustainable performance.
- APresent it as an extraordinary item after net income
- BExclude it from profit or loss and report in equity
- CInclude it in profit or loss, with separate disclosure if materialCorrect
Explanation
IFRS prohibits extraordinary item classification. Unusual or infrequent items remain in profit or loss, and material items are disclosed separately by nature and amount so analysts can adjust.
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