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Reporting Requirements for Annual Financial Reports of State Agencies and Universities

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Reporting Requirements for Annual Financial Reports of State Agencies and Universities

Notes & Samples

NOTE 23 – Unusual or Infrequent Items

Unusual or infrequent items are transactions or other events that are either (or both):

  • Unusual in nature
  • Infrequent in occurrence

These items are reported in the government-wide, governmental fund and proprietary fund statements.

Note: GASB 103 replaced the previous classifications of extraordinary items and special items with this single category.

Evaluation Criteria

Determining whether an event or transaction qualifies as unusual or infrequent requires the application of professional judgment. Unless the available evidence clearly supports classification as unusual or infrequent, the event or transaction must be presumed to be part of the agency’s ordinary and typical activities. In making this determination, agencies must evaluate the nature of the underlying event within the context of the environment in which they operate. An event or transaction qualifies if it is either (or both):

  • Unusual in nature
  • Infrequent in occurrence

Unusual in Nature

An event is considered unusual in nature when it possesses a high degree of abnormality and is clearly unrelated to (or only incidentally related to) the agency’s normal operations. This assessment requires consideration of the agency’s specific characteristics, including the type and scope of its operations and its operating policies. The primary factor in this evaluation is the agency’s operating environment, which includes the:

  • Nature of its business-type activities
  • Geographic location
    –AND–
  • Extent of governmental regulation under which it operates

Because these factors vary across agencies, a transaction may be considered unusual for one agency but not for another. The fact that an event or transaction is outside management’s control does not (by itself) establish that it is unusual in nature.

Infrequent in Occurrence

An event is considered infrequent in occurrence when it is not reasonably expected to recur in the foreseeable future. This determination must be based on evidence of prior occurrences and an assessment of the likelihood of recurrence given the agency’s operating environment. As with unusual items, the evaluation of recurrence is specific to the agency; a transaction that is infrequent for one agency may be more common for another with similar activities.

Disclosure Requirements

For each unusual or infrequent item, agencies must disclose (in note 23) the item’s related:

  • Program
  • Function
  • Identifiable activity (if applicable)
  • If the item is within management’s control

These note disclosures provide necessary context by linking the item to the agency’s operations and indicating if it resulted from:

  • External factors
    –OR–
  • Internal decisions

Agencies must also include a clear description of the nature of the underlying event or transaction that explains:

  • The circumstances that led to recognition.
    –AND–
  • Why the item meets the criteria for classification as unusual or infrequent.

The description must be specific to the agency’s facts and not rely on generic or boilerplate language.

When applicable, agencies must disclose the financial impact of the item, including:

  • The amount recognized
    –AND–
  • How it is presented in the financial statements

    Note: Management’s control does not affect classification but must be disclosed to provide users with a complete understanding of the event.

Agencies must disclose in Note 23 all unusual or infrequent items regardless of the amount. The information is consolidated on a statewide basis to determine the significance of the item on a statewide basis. Only significant amounts on a statewide basis are disclosed in the ACFR according to GASB requirements.

NOTE: Hurricanes are not considered a special or unusual or infrequent item in Texas since hurricanes could reasonably be expected to recur in the foreseeable future and the hurricane is not within management’s control.

Submit a copy of the agency’s Note 23 from its published AFR through the ONDSS web application. The required format is a Microsoft Word document (latest version: docx) with header information that includes: agency name/number and note number/name. If Note 23 does not apply, do NOT submit a note to indicate “not applicable.”