When an entity disposes of a segment of its business, it is said to have experienced a discontinuance of operations. To qualify as discontinued operations , the assets, results of operations, and activities of the discontinued segment must be clearly distinguishable, physically and operationally, from the other assets, results of operations, and activities of the entity. Entities must meet certain classification and disclosure requirements before disposing of a segment of its business. A separate income statement category for gain or loss from disposal of a business segment must be provided. The results of operations of a segment that has been or will be disposed of is reported in conjunction with the gain or loss on disposal-separately from continuing operations.
Extraordinary items consist of material items that are unusual in nature and occur infrequently.
In order for an item to be classified as an extraordinary item on the income statement, both characteristics must exist. Extraordinary items are shown net of taxes in a separate section of the income statement just above net income. Material gains and losses that are either unusual or occur infrequently, but not both, are excluded from the extraordinary items. If material, these items are disclosed separately, if immaterial, they may be combined with other items in the income statement. When an entity adopts a new accounting principle that is different from one previously used, a change in accounting principle results.