Author Archives: jonathan.krieger

As we have discussed in class, Hurricane Katrina was classified as “ordinary” for accounting purposes because hurricanes are not infrequent in Louisiana.  The article points out that it is nearly impossible to classify something as infrequent noting that:

One accounting textbook terms them “so restrictive” that they can include only “such items as a single chemist who knew the secret formula for an enterprise’s mixing solution but was eaten by a tiger on a big game hunt or a plant facility that was smashed by a meteor.”

It does make sense to make it very difficult to classifying events as “extraordinary.”  If it was easy, managers would likely manipulated financial statements as users often ignore “extraordinary items” as one time charges unlikely to be repeated.

While hurricanes to occur in Louisiana, I think that Katrina can still be classified as extraordinary due to what occurred after the hurricane passed.  Katrina in itself, I will acknowledge, should not be classified as extraordinary.  One can argue that it was the aftermath of Katrina, and the controversy surrounding the handling of the disaster, that can be classified as extraordinary.  Perhaps the delays in clean up, and the demographic shift of people out of New Orleans, had a more long term financial effect on the city.