CPA Hot Topics – February 2015 Extraordinary Items

Garrett Gleim sends CPA candidates informative emails concerning different aspects of the CPA exam. Candidates can see the most recent email and all the archives here on the CPA Candidate Forum.

I trust that you are well into your studying for the first window of 2015. You have one more month to complete a section in this window and continue on your path to becoming a CPA. This Hot Topics email is a heads up for the future – the Accounting Standard Update (ASU) we discuss will not be testable until Q4 of this year. Once you read it, you may become even more determined to complete all four sections of the exam in 2015 instead of postponing to another year!

In January of 2015, the FASB issued ASU 2015-1, which eliminates the concept of an extraordinary item from U.S. GAAP. Presently, if an event or transaction meets the criteria for an extraordinary item (i.e., unusual in nature and infrequent in occurrence), an entity is required to segregate the extraordinary item from the results of the ordinary operations and show the item separately in the income statement, net of tax, after income from continuing operations. Accordingly, eliminating the concept of extraordinary items will save time and reduce costs for preparers by no longer requiring them to assess whether a particular event or transaction is extraordinary, and preparers, auditors, and regulators will no longer need to evaluate preparers’ treatment of said item(s).

As a result of ASU 2015-1, an entity will

1. Report a material event or transaction that is unusual in nature and/or infrequent in occurrence as a separate component of income from continuing operations. These items must not be reported net of income taxes.

2. Not be required to present earnings per share (EPS) amounts for extraordinary items separately.

Remember that you do not need to worry about these changes if you take your Financial Accounting and Reporting (FAR) section in Q1, Q2, or Q3. If you are taking the FAR Exam in Q4 of 2015 or later, don’t worry – Gleim will provide you with updates to our material for Q4 so you are studying the new ASU.

As a final note, I want to stress to you again how important it is for you to study the IFRS Differences and answer the IFRS questions in the FAR materials. We continue to hear feedback from CPA candidates that our treatment of IFRS is wholly sufficient. Set yourself up for success on the exam by paying extra attention to these items!

Do you have any questions or comments about this week’s Hot Topics article or the CPA Exam? Email me at hottopics@gleim.com. Gleim Personal Counselors are available to help you develop a manageable study schedule and help you pass the CPA exam. Contact them at 800.874.5346, ext 498 or personalcounselor@gleim.com. Take advantage of the opportunity to get help from our extraordinary team!

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