Author Archives: brian.wallick

I know we touched on this a little on class when discussing how to create an income statement, but it still seems a little crazy that 9/11 is not deemed an extraordinary by accounting standards.  While we deem those extraordinary items as infrequent and unusual (which 9/11 seems to be), the FASB’s final decision makes more sense when thinking from an accounting perspective.  The real world and the accounting world are two separate things and that is important to remember.

The thing that made this article confusing is that the FASB’s Emerging Issues Task Force decided 9/11 was extraordinary and then a week later decided just the opposite.  It really shows this is one of those easily debatable issues, which means no matter what FASB decided there were going to people on the other end that were going to be upset.

The quote from task-force member Dick Stock helped me to better understand the reasoning behind FASB’s change of heart.  Mr. Stock said that 9/11 affected almost every company and created such a broad new economic landscape that, “it almost made it ordinary.”  If most or all companies are going to have financial issues, everyone is going to be on a similar playing field so creating an extraordinary item line is not necessary.  It’s hard to envision many, if any other scenarios where ALL companies are affected.  This makes it harder as well because there is really no precedent to work off of.

The last paragraph is similar to what I thinking when I read the quote from Mr. Stock.  Although 9/11 did affect our entire economy, it definitely had a much larger impact on some companies as opposed to others.  We have no way of figuring out what that exact effect is (or more importantly what the company believes it is) and that means investors have to try and figure out individually what they believe the impact was.