Some companies report additional items after income tax expense on their income statements

Some companies report additional items after income tax expense on their income statements

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Some companies report additional items after income tax expense on their income  statements. These items represent special items outside of normal business operations.  They are shown separately to ensure users can identify what income from continuing  business results will be. If any special items are included on the income statement, the  income tax expense or savings related to each item is net against the special item to  report it after taxes. These additional special items may be one of three types:  discontinued operations, extraordinary items, and changes in accounting principles. Discontinued operations occur when a significant segment of a business has been  identified for disposal. Once so identified, any gain or loss from operations of the  segment while it is being disposed of and any gain or loss on the sale of the assets of 
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Unformatted text preview: the segment, are reported separately from the remaining, continuing operations. Extraordinary items are events that occur infrequently and are unusual. They can include acts of God as long as they rarely occur in the area where the business operates. Events that would not be extraordinary as they occur regularly, although not yearly, are a severe freeze effecting crops in Florida or an earthquake in southern California. A change in accounting principle occurs when a company changes from one acceptable principle to another. The new principle is used to calculate the current year's amounts in the financial statements. The effect of the change on any prior years' amounts is shown separately in the income statement, net of taxes....
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This note was uploaded on 11/15/2011 for the course ACCT 2310 taught by Professor Staff during the Spring '09 term at Texas State.

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