Basic Extraordinary is the basic EPS component attributable to extraordinary items—events classified as both unusual and infrequent under pre-2015 US GAAP. FASB eliminated this category via ASU 2015-01 in 2015; the line is now zero in all current financial statements.
When a management with a reputation for brilliance tackles a business with a reputation for poor fundamental economics, it is the reputation of the business that remains intact.
Basic Extraordinary refers to the component of basic earnings per share (EPS) that was attributable to extraordinary items—events deemed both unusual in nature and infrequent in occurrence. This line isolated the after-tax, per-share effect of such rare events using only the basic weighted average shares outstanding. The extraordinary items classification was eliminated from US GAAP in 2015 (ASU 2015-01), so this category no longer exists in contemporary financial statements and is relevant only for analyzing pre-2015 historical data.
What Were Extraordinary Items?
Under pre-2015 US GAAP (APB Opinion 30), extraordinary items had to meet strict dual criteria:
- Unusual nature: Abnormal and unrelated to ordinary activities.
- Infrequency of occurrence: Not expected to recur in the foreseeable future.
Qualifying examples were rare: major losses from natural disasters in non-prone areas, government expropriations, or effects of significant new legislation. These were reported net of tax, separately from continuing and discontinued operations, to prevent distortion of core earnings.
Basic Extraordinary showed this impact using basic shares only, providing a direct view for existing common shareholders without dilution assumptions.
“When a management with a reputation for brilliance tackles a business with a reputation for poor fundamental economics, it is the reputation of the business that remains intact.”
— Warren Buffett, Chairman & CEO, Berkshire Hathaway Berkshire Hathaway Chairman’s Letter 1985 (1985)
Elimination of Extraordinary Items
In 2015, the FASB removed the extraordinary classification via ASU 2015-01 because:
Reasons for Removal
- Very few events truly met both strict criteria.
- Judgment led to inconsistent application across companies.
- Investors preferred footnote disclosures over separate presentation.
- Simplification of financial reporting.
Post-2015, such events are now reported within income from continuing operations (often as unusual or infrequent items) with detailed footnote disclosure if material.
IFRS has never permitted a separate extraordinary items category.
Historical Calculation
Formula: Basic Extraordinary = (After-tax Extraordinary Gain or Loss) ÷ Basic Weighted Average Shares Outstanding
The amount was always presented net of tax and calculated independently of other EPS components.
Historical Examples
Example 1: Rare Natural Disaster
Company incurs 52.5M.
After-tax loss: 0.8125 per share.
Example 2: Asset Expropriation
Government seizes assets abroad, resulting in $60M after-tax loss.
Basic shares: 80M. Basic Extraordinary = −$0.75 per share. Appeared below discontinued operations in pre-2015 statements.
Today, these would be included in operating/non-operating income with footnote explanations.
Relevance Today vs. Historical Analysis
In modern financial statements (post-2015), this line is always zero. Similar events are now part of continuing operations and often adjusted in non-GAAP normalized earnings.
For pre-2015 historical analysis:
- Explains significant one-time EPS impacts
- Should be excluded for normalized or core basic EPS
- Aids accurate long-term trend evaluation
Warning: Including historical extraordinary items in trend analysis without adjustment can mislead about ongoing performance.
Q · 01What is Basic Extraordinary in earnings per share?+
Q · 02Why was the extraordinary items EPS classification eliminated?+
Q · 03Does Basic Extraordinary appear on current financial statements?+
Q · 04How was Basic Extraordinary calculated historically?+
Q · 05How should analysts handle Basic Extraordinary in historical trend analysis?+
