But in contrast, Hurricane Katrina, which caused a New Orleans levy to break and then drown the city, should not be classified as an extraordinary event on the income statement, according to generally accepted accounting principles (APB Opinion No. 30).

To be considered extraordinary, the event must be both "infrequent in occurrence" and "unusual in nature." A hurricane in the Gulf Coast qualifies as neither.

It is expected that FASB will take this stance on Katrina. In general, concerned that companies will blame all kinds of loss on a one-time event, accounting authorities avoid classifying an event as extraordinary, The Wall Street Journal reported.

"As tragic as hurricanes and other natural disasters are for everyone affected, unfortunately every year many businesses across the country are affected by these types of events and they do not represent an unusual and infrequent occurrence to businesses or to insurers," FASB said in a statement.

Katrina's effects have had a severe impact on Mississippi, Louisiana and Alabama -- and it's an infrequent occurrence for those states -- but that doesn't make it is an ususual occurrence, said Carl Kampel, a FASB task force member.

"The costs of Katrina are just that -- costs," wrote Jack Ciesielski in his Weblog, The Analyst's Accounting Observer. "Call them that in the income statement and let management sort them out in their conference calls, pro forma releases and MD&As, because that's what they will do anyway. Whether or not they're in one line or another on the income statement will not make them go away."

Sources:

"For Annual-Report Purposes, Hurricane Katrina Is 'Ordinary.'" Diya Gullipalli. The Wall Street Journal.  September 2, 2005. http://online.wsj.com/article/0,,SB112562361481529845,00-search.html?KEYWORDS=FASB&COLLECTION=wsjie/archive  Accessed Sept. 18, 2005

"Quality Earnings: Katrina's Effects." Jack Ciesielski, The Analyst's Accounting Observer. September. 8, 2005.
http://www.accountingobserver.com/blog  Accessed Sept. 18, 2005