Final answer:
The claim is false; gains or losses from the sale or abandonment of PP&E are considered ordinary business transactions and are reported in the income statement, not as extraordinary items.
Step-by-step explanation:
The statement that a gain or loss from the sale or abandonment of property, plant, and equipment (PP&E) used in the business is reported as an extraordinary item, net of tax, is false. In accounting, gains and losses from the disposal of PP&E are typically considered ordinary business transactions and should be reported in the income statement along with other revenues and expenses from operations.
Extraordinary items used to be a classification for events and transactions that are distinctly separate from the ordinary activities of the business and are both unusual and infrequent. However, according to accounting standards, such as Generally Accepted Accounting Principles (GAAP) set by the Financial Accounting Standards Board (FASB), this classification has been eliminated. All events and transactions, including gains or losses from disposal of PP&E, are now included in operating income or loss or as part of continuing operations.
The treatment of these transactions affects how investors and other stakeholders view the company's financial health and operating results. Therefore, it is essential for financial reporting to be accurate and in compliance with the relevant accounting standards.