Understanding Extraordinary Items

A

Extraordinary items are always included net of tax after the net income from continuing operations. These items are unusual items for the company and occur infrequently.

Extraordinary items refer to significant events or transactions that are unusual in nature, infrequent in occurrence, and material in amount. They are events that are not expected to recur in the future and are not considered part of the normal course of business for a corporation.

According to accounting principles, extraordinary items are presented separately on the income statement to ensure that users of financial statements can easily identify and understand their impact on the company's financial performance. However, the presentation of extraordinary items on the income statement has undergone changes in recent years.

Historically, extraordinary items were reported on the income statement after net income from continuing operations and before taxes. They were net of tax, meaning that the tax impact related to the extraordinary items was reflected in the calculation. However, due to changes in accounting standards, the treatment of extraordinary items has been modified.

As of my knowledge cutoff in September 2021, the accounting standards under the Generally Accepted Accounting Principles (GAAP) in the United States (US GAAP) and the International Financial Reporting Standards (IFRS) do not require the separate presentation of extraordinary items on the income statement. Instead, under these standards, the concept of extraordinary items has been eliminated.

Under US GAAP, the presentation of extraordinary items was discontinued in 2015. Since then, companies are required to classify and report items as either operating or non-operating, depending on their nature and the industry in which the company operates. Non-operating items are presented after income from continuing operations, and they include items such as gains or losses from the sale of assets, interest income, and interest expense.

Similarly, under IFRS, the separate presentation of extraordinary items has been eliminated. Companies are required to present their income statement using either a single-statement approach (where all items, including operating and non-operating, are presented in one statement) or a two-statement approach (where the income statement is divided into an operating statement and a separate statement of comprehensive income).

Therefore, based on the current accounting standards, the most accurate answer to the question would be:

B. as a footnote to the statement as they are one-time items and are not part of the normal course of business for a corporation.

Please note that it's important to stay up to date with the latest accounting standards and refer to the official materials provided by the CFA Institute for the most accurate and current information.