Question

What issues must be considered when determining whether or not a loss from earthquake destruction should be treated as an extraordinary item?

Answer 1

When determining whether or not a loss from earthquake destruction should be treated as extraordinary item, the issue must be considered is whether events are unusual and infrequent? If the event are both unusual and infrequent then it is treated as extraordinary. To find out whether event (earthquake) is unusual and infrequent be depend on geographical location. For example suppose earthquake is occurred in Florida, where earthquakes are virtually unknown, it would be both unusual and infrequent and hence loss from earthquake would be treated as extraordinary. However earthquake took place in Southern California, where earthquake are unusual but not infrequent, the damage would not be deemed extraordinary but rather ordinary as here earthquake are frequent.