F1 - Exit or Disposal Activities

Question 1

What types of costs are associated with exit and disposal activities?

Answer 1

• Involuntary employee-termination benefits
• Costs to terminate a contract that is not a capital lease
• Other costs associated with exit or disposal activities

Question 2

Define extraordinary items.

Answer 2

• Material in nature
• Of a character significantly different from the typical or customary business activities(unusual)
• Not expected to recur in the forseeable future (infrequent)
• Not normally considered in evaluating the ordinary operating results of an enterprise

Key words: Unusual and Infrequent

Remember: Extraordinary items are recognized under U.S. GAAP but not IFRS.

Question 3

List some examples of extraordinary items.

Answer 3

• The abandonment of, or damage to, a plant due to an infrequent earthquake or an infrequent flood.
• An expropriation of a plant by the government.
• A prohibition of a product line by a newly enacted law or regulation.