Question

What are the criteria that an extraordinary item must meet?

1) It must be unusual and infrequent
2) It must be significant in amount
3) It must be both unusual and infrequent
4) It must be both significant in amount and unusual

Answer 1

An extraordinary item in financial reporting must be both unusual and infrequent, meaning it is not typical for business activities and not expected to recur soon. The extraordinary item concept has been eliminated from GAAP after December 15, 2015.

Step-by-step explanation:

Criteria that an extraordinary item must meet according to accounting standards are very particular. An extraordinary item in financial reporting must be both unusual and infrequent. This means it must be distinct from typical business activities and should not be expected to recur in the foreseeable future. It's also worth noting that with changes in accounting standards, specifically the Generally Accepted Accounting Principles (GAAP), the concept of extraordinary items has been eliminated for periods after December 15, 2015, under Accounting Standards Update (ASU) 2015-01.