FASB rejects extraordinary-treatment accounting for terrorist attack costs - Updata - Financial Accounting Standards Board - Brief Article

Healthcare Financial Management, Nov, 2001

The FASB Emerging Issues Task Force (EITF) has decided against the use of an extraordinary-item treatment for losses incurred in connection with the September 11 terrorist attacks, the FASB announced October 1, 2001. Accounting principles provide for extraordinary-item treatment for gains and losses that meet certain technical criteria. Gains and losses classified as extraordinary are shown on the income statement net of tax effects and after a subtotal income before extraordinary items.

At a September 28 meeting, the EITF concluded that, though the events of September 11 certainly were extraordinary, use of that label for financial reporting would not be the most effective way to communicate the financial effects of those events and, thus, the label should not be used in this case. The EITF observed that the economic effects of the events were so extensive and pervasive that it would be impossible to capture them all in any one line item of a financial statement. The EITF also recognized that separating direct from indirect effects with any degree of consistency would be very difficult. The final decision differed from tentative conclusions reached at an earlier meeting on September 20.

To read the final minutes of EITF Issue No. 01-10, "Accounting for the Impact of the Terrorist Attacks of September 11, 2001," go to http://www.fasb.org/eitf/issue01-10.pdf.>

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