Analyzing Business Earnings 49Exhibit 2.11. This summary highlights the rarity of extraordinary items under
current reporting requirements. Debt extinguishments represent the largest
portion of the disclosed extraordinary items. This leaves only from two to five
discretionary extraordinary items per year among the 600 companies surveyed.
The small number of gains and losses classified as extraordinary is consis-
tent with their definition. However, this rarity adds to the challenge of locating
all nonrecurring items as part of a thorough earnings analysis. Few nonrecur-
ring items will qualify for the prominent disclosure that results from display in
one of the special sections, such as for extraordinary items, of the income
statement. A sample of discretionary extraordinary items—that is, items not
treated as extraordinary by a specific standard—is provided in Exhibit 2.12.
Natural disasters and civil unrest are some of the more typical causes of
extraordinary items. The extraordinary gain of American Building Mainte-
nance may appear to fail the criterion ofunusualsince small earthquakes are
EXHIBIT 2.10 Examples of discontinued operations.
Discontinued
Company Principal Business OperationAmerican Standard Companies Inc. Air conditioning, bathroom Medical systems
(1999) fixtures, and electronics
Atlantic American Corporation Insurance Retail furniture
(1999)
Bestfoods Inc. (1999) Food preparations Corn refining
Dean Foods Inc. (1999) Food processor Vegetables segment
Decorator Industries Inc. (1999) Interior furnishing products Manufacture and sale
for the retail market
The Fairchild Corporation (2000) Aerospace fasteners and Fairchild technologies
aerospace parts distribution business
Gleason Corporation (1995) Gear machinery and Metal stamping and
equipment fabricating
Maxco Inc. (1996) Manufacturing, distri- Automotive refinishing
bution, and real estate products
A.O. Smith Corporation (1999) Motors and generators Storage tank and
fiberglass pipe markets
Standard Register Company (1999) Document management Promotional direct
and pr int production mail operation
Textron Inc. (1999) Aircraft engines, automotive Avco Financial
parts, and finance Services
Watts Industries Inc. (1999) Valves for plumbing, heating Industrial oil and gas
and water quality industries businesses
SOURCES: Companies’ annual reports. The year following each company name designates the annual re-
port from which each example was drawn.