What is an Exceptional Item

An exceptional item is a charge incurred that must be noted on a company's balance sheet, in accordance with GAAP principles. Even though exceptional items are considered to be part of ordinary business charges, they must be disclosed due to their sheer size or frequency.

BREAKING DOWN Exceptional Item

Don't confuse exceptional items with extraordinary items: the latter is not part of a company's ordinary business dealings. Exceptional items, on the other hand, are material and need to be documented to provide investors and regulators with accurate and informative financial statements.

Example of an Exceptional Item

As an example, in early 2016, the British engine manufacturer announced they would be taking an exceptional restructuring charge of GBP 75 million to GBP 100 million to account for measures to shore up their balance sheets through job cuts. As a special charge, these don’t rise to the standard of extraordinary but do add financial statement transparency as exceptional charges.