Extraordinary gains or losses are substantive events that affect the financial position of a business in an unusual and infrequent manner. The occurrence of such events must be recorded by a business as either extraordinary losses or gains. During consideration, the business must evaluate clearly their nature of abnormality and distinguish it from the normal operations of the entity different from its line of business. Regarding reoccurrence, the business should determine whether there are possibilities of it reoccurring in the unforeseeable future. Some of the critical extraordinary items that result in a business include natural disasters like earthquakes, floods, and meteorites. On the other hand, the formulated human policies that result in extraordinary items include regulations that prohibit conduct of business and expropriation of property of the business. These items have separate disclosure since they are infrequent and unreported in net tax. Due to the abnormality and infrequency, they are reported separately from the continuing operations in the income statement (Libby et al., 2004).

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The earnings per share (EPS) is the ratio that takes into account the net profit attributable to a firm divided by the total number of the outstanding shares. There exist two types of EPS. These are the Basic EPS and Diluted EPS. The Basic EPS refers to the ratio of the total earnings of a business divided by the total number of outstanding ordinary shares at a time. On the other hand, the Diluted EPS refers to the EPS of a business taking into consideration all the other types of securities convertible to ordinary shares exercised at the period resulting in additional shares to the total shares. Some of these securities would include convertibles, warrants, stock options, and any form of dilution. In this case, potentially dilutive securities are always included in computation of EPS computation if it is a Diluted EPS (Warren et al., 2002). 

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