Your Ask Joey ™ Answer

How to decide whether a gain or loss is recorded to income from operations or non-operating income?

The classification is really quite subjective and is ultimately up to the company. When a company experiences an event and is deciding whether or not its normal operations or non-operating, they should assess the likelihood of the event occurring. Has it happened in the past? Will it happen again in the next few years?

For example, if the company incurs hail damage, and a hailstorm happens each year, then that would not be a surprise and the loss should be reported in income from operations. However, if the hailstorm happened in Hawaii, and a hailstorm has never happened there, then that even would be considered rare / unlikely. In that case, the gain or loss should be classified to non-operating income (loss).

The visual below lays out some buzzwords or phrases to help you assess how the event should be classified.


Back To All Questions

You might also be interested in...

  • Discontinued Operations on the FAR CPA Exam

    Overview of Discontinued Operations In financial reporting, discontinued operations refer to a component of a company’s core business or product line that have been divested or shut down. Discontinued operations will be reported (net of tax) separately from continuing operations on the income statement. The reason that discontinued operations are reported separately is so that...

  • Equity Method Excel Workbook

    If you would like to use the Excel workbook that was used to create the Universal CPA lecture on the equity method, please click the link below to download the Excel workbook: Equity Method Lecture Example https://youtu.be/QE4flnmuSkw

  • How Hard is the CPA Exam?

    So you’re thinking about taking the CPA exam? Whether you have a dream of becoming a tax advisor, feel as though you need public accounting experience, or just want to solidify your business acumen, the CPA license is one of the most prestigious and well respected licenses in the business world. The exam itself is...