Extraordinary items are financial events or transactions that are both unusual in nature and infrequent in occurrence. These items typically stand out due to their significant impact on the financial health and statements of a company, often requiring separate disclosure to inform stakeholders. Examples might include a major lawsuit settlement or the destruction of assets due to a natural disaster, events that are not part of the usual course of business. Historically, the separation of extraordinary items allowed analysts to better evaluate the core performance of a company by excluding these erratic events. However, accounting standards have evolved, and extraordinary items as a separate category have been largely retired in the International Financial Reporting Standards (IFRS) and the Generally Accepted Accounting Principles (GAAP) frameworks.

For instance, a power plant company recording the damage expense from an unprecedented hurricane as an extraordinary loss could once classify this as such for clarity. However, under current standards, such events might now be included in regular reporting but disclosed distinctly in accompanying notes. This change enhances consistency but requires diligent attention from analysts to separate typical from atypical financial performance. Retaining proper historical records of such occurrences remains crucial for decision-making processes.