What is the correct treatment for extraordinary items in the financial statement?

Extraordinary items are significant transactions that are both unusual in nature and infrequent in occurrence. These items need distinct reporting to inform the stakeholders accurately about the financial health of an organization and to maintain transparency in financial statements.

When extraordinary items are reported, they are typically placed after special items, which include gains or losses that are unusual or infrequent but not meeting the strict criteria of being extraordinary. This positioning highlights the unique nature of extraordinary items and ensures that they are not mixed with regular operational income or expenses, thus providing clarity to users of the financial statements.

By reporting extraordinary items after special items, the financial statement adheres to relevant accounting standards, allowing for a clear distinction among various types of income and losses. This specific order aids users in understanding the impact of these items on the overall financial situation of the entity.