The agreed-upon-approach differed from the tentative conclusions reached on September 20. Specifically, the Task Force decided against use of an extraordinary item treatment for losses incurred in connection with the recent terrorist attacks.

In commenting on the consensus reached, EITF Chairman Tim Lucas stated, "Because of the far-reaching effects of the September 11 events, coupled with a weakening economy that predated those events, it would be difficult to capture the resulting economic effects in companies' financial statements. As one example, the events impacted airlines in multiple ways. Air carriers were unable to fly for two days, suffered the effects of rerouting and initiated layoffs in anticipation of lower passenger demand. No single line item can capture all of those effects. Other companies representing a broad range of industries are experiencing similar impacts."

Accounting principles provide for "extraordinary item" treatment for gains and losses that meet certain technical criteria. Gains and losses classified as extraordinary are shown on the income statement net of tax effects and after a subtotal income before extraordinary items. At the September 20 meeting, the Task Force had tentatively concluded that some losses, directly attributable to the events of September 11, should be shown as extraordinary and undertook an effort to clarify how to separate such losses from other financial results.

At the September 28 meeting, the Task Force concluded that, while the events of September 11 were certainly extraordinary, the financial reporting treatment that uses that label would not be an effective way to communicate the financial effects of those events and should not be used in this case.

According to the EITF, the economic effects of the events were so extensive and pervasive that it would be impossible to capture them in any one financial statement line item. Any approach to extraordinary item accounting would include only a part -- and perhaps a relatively small part -- of the real effect of those tragic events. Readers of financial reports will be intensely interested in understanding the whole impact of the events on each company. The EITF concluded that showing part of the effect as an "extraordinary item" would hinder, rather than help, effective communication.

The EITF also recognized that it would be very difficult to separate direct effects from indirect in a consistent way. The primary objective of the FASB and the Task Force in raising this issue was to provide financial statement preparers and auditors with guidance that would be straightforward and consistently applied. The members of EITF recognized that applying existing guidance to this event and identifying losses (and gains) that should be classified as extraordinary was very difficult and reasonable people could come to very different answers. After considerable efforts over the last two weeks to clarify the issue, the EITF concluded that the best way to achieve the objective would be to not use the classification for any of the effects of these particular events. That approach is also consistent with the broader objective of providing financial reports that communicate effectively and clearly.

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