The Financial Accounting Standards Board instituted the extraordinary items rule to provide more insight and transparency to financial statements. Events can be classified as extraordinary items if they are unusual or occur infrequently. Classifying unusual and infrequent events as extraordinary on financial statements provides a more accurate picture of the businesses’ performance. For companies to meet the unusual standard, the event must be extremely abnormal and are totally unrelated to ordinary activities of the business. The infrequency standard is met when the event has not occurred before and is not likely to occur in the future. If both criterions are met, gains and losses resulting from the event can be reported as extraordinary items (Warfield, Weygandt, Kieso, 2008).

The September 2001 terrorist attack on the World Trade Center destroyed many businesses and caused major devastation to others. The Emerging Issues Task Force is a component within the Financial Accounting Standards Board whose purpose is to provide guidance for implementation of FASB standards. The EITF was responsible for determining how business losses incurred as a result of the attack should be reported. After much consideration, the task force ruled that the losses could not be reported as extraordinary items, citing that measuring the losses would ne too difficult (Isodore, 2001).

By definition, extraordinary items are unusual and infrequent. Based solely on the definition, the attack on the World Trade Center certainly met the criterion for extraordinary items. The attack was certainly unusual and infrequent. The attack had nothing at all to do with business activities, and nothing of that magnitude had ever occurred before, and there was no likelihood of it occurring again. The task force defended its decision by saying that companies could take advantage of the