Reporting Requirements for Annual Financial Reports of State Agencies and Universities

Notes & Samples

NOTE 23 – Extraordinary and Special Items

Report the following items at the bottom of the operating statement after “Other Financing Sources (Uses)” and disclose in Note 23. If both occur in the same fiscal year, report each item separately within the “Extraordinary and Special Items” section, with special items reported first.

• Extraordinary Items are transactions or other events that are both unusual in nature and infrequent in occurrence.
• Special Items are significant transactions or other events within the control of management that are either unusual in nature or infrequent in occurrence and are reported on the operating statement before extraordinary items.
• Insurance recovery payments for impaired capital assets when realized (GASB 42, paragraph 21) (FEMA is not considered insurance). For more information on reporting insurance recoveries for impaired capital assets as special or extraordinary items, see Reporting Impairment Amounts in the AFR and in USAS.

Disclose the following item in Note 23 but do not report separately at the bottom of the operating statement:

• Significant transactions or other events that are either unusual or infrequent but are not within the control of management (GASB 34, paragraph 89).

GASB 62, paragraphs 45-49, amended the definition of special and extraordinary items, as follows:

• Judgment is required and, unless the evidence clearly supports its classification as special or extraordinary item, an event or transaction is presumed to be an ordinary and usual activity.
• Taking into account the environment in which the agency operates, the following criteria must be met to classify an event or transaction as either unusual in nature, infrequent in occurrence or both:
  • Unusual in nature – the underlying event or transaction possesses a high degree of abnormality and is a type clearly unrelated to (or only incidentally rated to) the ordinary and typical activities of the agency.
  • Infrequency in occurrence – the underlying event or transaction must be a type that is not reasonably expected to recur in the foreseeable future, taking into account the environment in which the agency operates.
• Unusual in nature:
  • Specific characteristics that must be considered in determining ordinary and typical activities of the agency include the:
    • Type and scope of operations
    • Operating policies of the agency
  • The primary consideration in determining whether an underlying event or transaction is abnormal and significantly different from the ordinary and typical activities of the agency is the environment in which the agency operates, which includes the:
    • Characteristics of its business-type activities
    • Geographical location of its operations
    • Nature and extent of governmental regulation
  • Differences in respective environments may result in an event or transaction being unusual in nature for one agency but not another.
  • An event or transaction beyond the control of management does not establish the fact of being unusual in nature.
• Infrequency of Occurrence:
  • An event or transaction is considered to occur infrequently if it is not reasonably expected to recur in the foreseeable future.
  • The probability of reoccurrence in the foreseeable future is assessed by evidence of a past occurrence of an event or transaction for a particular agency and takes into account the environment in which an agency operates.
  • Probabilities of recurrence for a specific transaction may be met by criteria for one agency but be different for another agency with a similar transaction.
• Certain gains and losses:
  • Certain gains and losses that are usual in nature or may be expected to recur as a consequence of customary and continuing operations are not reported as extraordinary items. Examples include:
    1. Write-down or write-off of receivables, inventories, equipment leased to others or intangible assets
    2. Gains or losses from exchange or translation of foreign currencies, including those relating to major devaluations and revaluations
    3. Other gains or losses from sale or abandonment of capital assets used in operations
    4. Effects of a strike (including those against major suppliers)
    5. Adjustment of accruals on long-term contracts
  • Although rare, an event or transaction may occur that clearly meets the criteria for unusual in nature, infrequent in occurrence or both and results in an extraordinary gain or loss as described in the examples above. For example, a gain or loss (shown in example #a or #c above) are included in the extraordinary item if they are a direct result of a major casualty (such as an earthquake or a prohibition under a newly enacted law or regulation). However, any portion of losses are not included in the extraordinary items if they resulted from a valuation of assets from an ongoing-concern basis.

Agencies must disclose in Note 23 all special or extraordinary 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.

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.”