Certain items must be reported separately from continuing operations on the income statement to provide transparent communication of the organization's performance. Items reported separately include income from discontinued operations, extraordinary items, and other comprehensive income. These items can be misleading to financial statement users if they are not reported separately from income from continuing operations.
Income from discontinued operations impacts the current period income statement, the income statement presentation, and the earnings per share presentation. A business segment that is removed from continuing operations is classified as a discontinued operation. The resulting gain or loss from the discontinuance is reported on the income statement after income from continuing operations, and details are disclosed in the financial statement notes. In accordance with GAAP, the use of discontinued operations is greatly restricted to only include strategic shifts and not to all discontinued operations. For example, this would not involve closing down a store or factory unless a company closed down the operation to get out of manufacturing business or a store to discontinue retail business. Discontinued operations can still exist but be less common.
An extraordinary item results from a transaction that is so infrequent that it will rarely, if ever, happen again, and must be outside the company's normal operations. Such items are extremely rare. An example of an extraordinary item might be property damaged in an earthquake in an area where earthquakes are not common. Extraordinary items are reported on the income statement after income from continuing operations and are reported net of tax.
Another section that may be added is other comprehensive income, the section of an income statement that discloses transactions that are not allowed to be presented in net income. This section supports transparency by disclosing items that may impact the overall fair value of the organization. Items in other comprehensive income are reported net of tax. Examples of items reported in other comprehensive income include the following:
1. unrealized holding gains or losses classified as available for sale
2. foreign currency translation gains or losses
3. pension plan gains or losses; pension prior service costs or credit4. derivatives