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\title{Income Components in the Italian and International Experience: From the Contraposition between Ordinary and Extraordinary Costs and Revenues to the Contraposition between Income Components Extraneous or not Extraneous to the Business Activity up to the Negation of Any Contraposition between Types of Costs or Revenues}
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             \author[1]{Prof. Maria Silvia  Avi}

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\date{\small \em Received: 1 January 1970 Accepted: 1 January 1970 Published: 1 January 1970}

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\begin{abstract}
        


The costs and revenues recognised in the profit and loss for users outside the company have evolved in various countries and at the level of international accounting standards concerning the juxtaposition of large aggregates of negative and positive income components. Over time, there was talk of costs and revenues without any contraposition whatsoever, even going so far as to state that a profit and loss was perfectly valid with three items recorded in such a document: total costs, total revenues, profit or loss for the year. Over time, this situation has completely changed both in Italy and internationally. In the 1990s, the profit and loss governed by the international IAS and the profit and loss governed by Italian civil law presupposed the contraposition of extraordinary costs and revenues. After this contraposition had been eliminated at the international level, discussions began in Italy about whether the contraposition between extraordinary and ordinary income components could be replaced with another contraposition using the term 'extraneousness' or 'not extraneousness' to the company's activity.Keywords: ordinarietà dei costi ricavi, straordinarietà dei costi ricavi, estraneità alla gestione d'impresa dei costi ricavi, non estraneità dei costi ricavi alla gestione di di impresa punta.

\end{abstract}


\keywords{ordinarietà dei costi ricavi, straordinarietà dei costi ricavi, estraneità alla gestione d'impresa dei costi ricavi, }

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Prof. Maria Silvia Avi efore addressing the issue of the contraposition between cost and revenue types in the context of communication destined for third parties external to the company, the writer considers it appropriate to point out how a profound discordance can be identified between the contraposition identifiable in the profit and loss of public financial reporting and the contraposition between costs and revenues destined to reclassify profit and loss for internal company management purposes. Whereas in the document intended for external company management, over the decades, there has been an evolution from the lack of contraposition between income components to the contraposition between ordinary and extraordinary components, to the subsequent juxtaposition of parts extraneous and not extraneous to business operations, and finally to the absence of any juxtaposition between costs and revenues of an ordinary nature or not extraneous to business operations and those of an extraordinary nature or not extraneous to business operations, in the reclassification used internally by the company for information and management purposes, we have witnessed, over time, the use of a single juxtaposition based on the characteristic business activities. Despite remembered, in this respect, that the concept of a system is based on the interrelation of several elements. The system will have the further connotation of "integration" if, between the various aspects and a correlation expressible in substantial terms, an interconnection of a "terminological" nature can also be identified. Only in such interconnection is it possible to speak of an analysis system. To provide a complete, exhaustive and, above all, understandable picture of the company's situation, there must be real conceptual integration at the level of substance and form.\par
From a substantive point of view, integration must be developed as only in the presence of such a characteristic can the conceptual scheme of analysis cover every area that requires further investigation. Formal integration is indispensable if the analysis results are to be understood and communicated effectively. The use, for example, of the same terms identifying similar concepts appears to be an indispensable element if the analysis is to be understandable to all those it is intended for. To connote different ideas with different phrases seems equally important to correctly understand the results obtained from the in-depth analysis of accounting data.\par
Integration, therefore, means the construction of a unified scheme that permeates each step of the analysis.\par
For analysis by means of indices, in the opinion of the writer, it is appropriate to adopt a scheme that:\par
1. Contrasts typical activities with non-core activities.\par
2. Integrates with the economic-financial ratios, in both substantive and formal terms, and with the cash flow statement scheme to be adopted. The profit-and-loss reclassification that provides the most significant utility for information and management purposes is, without doubt, the 'cost of sales and revenues' reclassification.\par
While in the case of the balance sheet, the most commonly used reclassification is based on the differentiation of the maturities of accounting items of an equity and financial nature, in the context of the profit and loss reclassified to cost of sales and revenues, the re-aggregation of things is carried out according to a logic that is based on the demarcation line between core and non-core activities.\par
Revenues are therefore subdivided into typical and non-characteristic revenues; likewise, costs that are not typical are contrasted with characteristic costs.\par
The juxtaposition of characteristic revenues and characteristic costs makes it possible to determine an aggregate of extreme informative relevance: The operating income from typical operations (Rogc), otherwise known as GOP (Gross Operating Profit).\par
This sub-aggregate represents the profit or loss of the typical business activity.\par
At this point, the reclassification in question does not contrast ordinary activity with extraordinary activity but rather, characteristic activity with noncharacteristic activity.\par
This does not appear to be the appropriate place to elaborate on this differentiation, which is well expressed in Exhibit I.\par
Typical activity means the core business of the enterprise, i.e. the activity for which the enterprise was established. The core business, therefore, represents the focus of the company's activity. Maximising the profitability of this activity should, barring the occurrence of pathological situations, constitute the primary objective of business activity.\par
As can be understood from what has been said so far, precisely identifying the demarcation line between core and non-core activities is an indispensable condition for the GOP aggregate to be meaningful and informative.\par
Concerning the non-core part of the company's activities, it can be briefly stated that four distinct managements can be identified in this area:\par
1. Asset Management 2. Financial Management 3. Non-Core Management by definition 4. Tax Management.\par
Concerning the content of each section of the non-core business, the following brief remarks can be made:\par
1. Asset management refers to all income and expenses arising from investments, constituting invested capital, which are not used in the company's core business. As noted in the preceding pages, capital assets include two subaggregates, referred to as short-term assets and long-term assets, within which those asset items must be included, respectively, due within the financial year or beyond the next financial year, not utilised in the company's core business.\par
Examples include civil buildings, securities and participations. Suppose such non-characteristic asset items generate income or such investments require incurring costs. In that case, the negative and positive income values must be included in the asset management of the non-characteristic business activity. 2. All income and expenses arising from receivables or payables of a financial nature are to be included within the scope of financial management. These amounts consist primarily of interest income and expenses on current bank accounts or other financial debts and receivables. 3. Concerning non-recurring operations by definition, it must be emphasised that the aggregate under consideration is often improperly identified with the term 'extraordinary income and expenses'. However, the aggregate of extraordinary income/expenses does not coincide with the aggregate of nonrecurring items by definition, as it is possible to identify numerous accounting values that, although ordinary, identify income items of a non-recurring nature (e.g. capital gains/losses arising from the sale of fixed assets connected to the normal replacement of assets within the production process). The aggregate 'non-typical income and expenses by definition' must include items that, by their intrinsic nature, cannot relate to the performance of typical activities. We mean, for example, all capital gains/losses and contingent assets and liabilities of both ordinary and extraordinary nature 4. Tax management identifies income taxes for the year. This item makes it possible to determine how much income tax has affected income before tax, i.e. calculated gross of this cost.\par
Neither taxes nor property taxes should therefore be included in this aggregate. The former is because they identify sums paid to obtain identifiable services, as opposed to taxes paid to enjoy a range of services provided by the public entity. On the other hand, wealth taxes are not included in tax management because the requirement to be met with the identification of this aggregate is the determination of the percentage of produced income subject to taxation.\par
From the analysis of the non-characteristic profit and loss items, it is clear that the part of the profit and loss that identifies the characteristic activity is made up of all the company 'areas' that allow the performance of the activity for which the company was established.\par
By characteristic activity, we do not mean transformation activity in the physical-technical sense (or production activity in the strict sense), but the combination of the latter, of administrative, commercial and procurement and research and development activities.\par
To maximise the informative capacity of profit and loss, characteristic costs must be re-grouped according to 'the area of use of the production factor being recognised'.\par
What matters in the reclassification to cost of sales is the destination of the input entered into the business. On the other hand, the origin of the cost is of no importance, an element on which, on the contrary, the civil law reclassification provided for by Articles 2425 et seq. of the Civil Code is based.\par
The aggregates that can be identified as part of the typical business activity are the following: 1) The aggregate "production costs" comprises all costs concerning which production factors are used in the production area of the enterprise. This area may be further detailed if necessary to fulfil particular information purposes.\par
By way of example, it should note that in the hotel business, the total aggregate "production posts" would be characterised by a reduced information capacity resulting from the fact that the real value does not identify the operating area of use of the production factor. For this reason, the aggregate "production costs" in the tourism sector are generally further broken down into Food \& Beverage costs, Room Division costs and MOD (Minor Operating Department) costs.\par
From these brief considerations, it is clear how the aggregate "production costs" can be subject to further adjustments should the entrepreneurial reality within which it is analysed require them.\par
Regardless of any further subdivision by sector, it must emphasise that inventories must also be included in this aggregate.\par
However, the overall summation of all inventories would lose important information about the composition of production costs.\par
For this reason, it is appropriate to distinguish inventories of:a) Raw Materials b) Work in Progress c) Finished Goods.\par
For-profit and loss to fully express its informative capacity, each aggregate of inventories must be treated differentially in accounting terms.\par
Regarding raw materials, it should be noted that the algebraic sum of opening inventories plus purchases minus closing stocks gives the value of the consumption of materials used in production. This value has a much higher informative capacity than simple purchases since, for example, an inter-temporal comparison of raw material purchases or planned purchases with realised investments might not suggest significant considerations.\par
The increased purchase of raw materials may be due, for example, to voluntary stockpiling, which, not having caused consumption, has increased stocks; a circumstance which, if on the financial side, may cause negative effects on the amount of requirements, on the economic side does not entail any consequences at the level of income management of the production activity.\par
Consumption, on the other hand, is an entity of primary importance in the company's management.\par
An increase in consumption as a percentage of sales constitutes an element from which to draw a negative judgement on utilising the production factor in question. The addition may be due, for example, to the rise in the purchase price of the input, to an increase in the consumption of the input in quantitative terms, or even to theft or deterioration within the company.\par
Regardless of the cause, knowing the consumption trend is always essential information.\par
That is why profit and loss are reclassified to 'cost of sales and revenue'., the consumption of raw materials is shown separately from all other items.\par
The consumption of ancillary materials must also be shown explicitly, as this item allows an analysis of the use of these inputs.\par
Concerning inventories of work-in-progress, on the other hand, the sum of these values and the total industrial costs, including the consumption of raw materials, provides the price of the finished product.\par
A separate discussion must be made about semi-finished products. These can be: 1) Of Purchase 2) Internal Production Semi-finished purchased goods are to be treated in the same way as raw materials. Therefore, the entry "consumption of purchased semi-finished products" will appear for these factors. In contrast, semifinished work-in-progress, although having different physical characteristics from work-in-progress, represent unfinished items that have been the object of internal production. Therefore, semi-finished work-inprogress should be included in the cost of goods sold alongside work-in-progress.\par
The algebraic sum of the cost of the finished product and the opening and closing inventories of finished goods or merchandise finally leads to determining the value of the product sold, also referred to as the Cost of Sale.\par
To complete the analysis of the Cost of Sale, we wish to point out the correct reclassification of an item that often misleads the analyst: internal constructions.\par
Consider, for example, the internal construction of an industrial building. This value represents a positive income component, not because it constitutes revenue but because it indirectly adjusts costs used in internal construction.\par
This role as an indirect cost adjustment causes internal construction to be deducted from the cost of the finished product in the reclassified profit and loss.\par
Since the costs to be adjusted are of a production nature, internal constructions are to be shown in the cost of the finished product with a negative sign, irrespective of the purpose of the internal construction contract.\par
In termini sintetici, il costo del prodotto venduto può essere così sintetizzato: 1) Concerning administrative costs, it is evident, also from the wording used, that all income items about the administrative sector of the enterprise should be included in this annexe. 2) In the business costs aggregate, all business costs incurred so that the goods and services produced by the enterprise can be marketed should be recognised.\par
Both fixed costs, such as advertising, for example, and variable costs, such as, for example, commissions granted to representatives, are to be included here.\par
3) The fourth aggregate concerning research and development costs is not characteristic of every industrial enterprise. This item is identified only in enterprises where research is of considerable importance. 4) In the aggregate overhead costs are to be included in those costs that the parent company charges, offbalance sheet, to branches or subsidiaries without monetary consideration in return.\par
This transaction does not impact the income and assets of the subsidiary or branch as it does not represent an operating transaction relevant to general accounting purposes. This is why these costs are only charged to the profit and loss reclassified for internal purposes without passing through the accounts of the subsidiaries or branches.\par
This transaction cannot, therefore, be regarded as unlawful and detrimental to the minority shareholders of the companies, as it only represents an accounting entry made for the internal valuation purposes of the general management of the branches/subsidiaries.\par
Overhead costs are recognised exclusively in the financial reporting of the parent company, which will offset these negative income elements against the positive income elements arising from the participation in the other group companies.\par
The parent company, however, generally considers that it must "pass on" these costs to the branches or subsidiaries since every activity carried out in the holding company is conducted so that the units or subsidiaries can, in turn, carry out their production activities. For this reason, the costs or part of the costs of the parent company are passed on to the branches or subsidiaries for accounting purposes.\par
The most frequently used reversal parameter is the turnover of the branches or subsidiaries. Units with a higher turnover are charged with a high Overhead Cost as they are considered more likely to absorb increased costs.\par
The presence of Overhead Costs causes the non-reclassified financial reporting profit to differ from the reclassified financial reporting profit. The discrepancy between the two values derives from the presence, in reclassified financial reporting, of a cost that does not exist in non-reclassified financial reporting.\par
From the above, it can be understood that overhead costs can only be included if the analysis is performed within the company.\par
The knowledge of such "virtual" costs is not accessible to users outside the company who, in the hypothesis in which they wish to carry out the profit and loss analysis, will necessarily have to content themselves with recording in the reclassified document the costs present in the public financial reporting of the company under study.\par
As noted, the separation of core and non-core activities makes it possible to determine the aggregate Profit represented by the operating income from core operations, otherwise referred to as GOP.\par
This aggregate, while representing an indispensable element of knowledge for the income analysis to be carried out, does not provide a sufficiently clear and explanatory view of the company's income situation.\par
To ensure that the reclassification of Profit and loss, carried out according to the criterion of 'cost of sales and revenue', can provide helpful information on company management, it is, therefore, necessary to identify further sub-aggregates with their peculiar informative capacity.\par
The first of these sub-aggregates is the socalled Gross Profit. This value derives from the contraposition between core revenues and the cost of the product sold.\par
Gross Profit essentially represents gross industrial profit net of production costs only. In the context of the analysis, this aggregate, interpreted together with the operating income from ordinary operations, provides a dimension of profitability related to pure production activity.\par
However, gross Profit and operating income from ordinary operations are not the only subaggregates or gross profits in the context of business profit analysis.\par
For such an analysis to be complete, it is necessary to identify a further aggregate that shows the performance of what is termed 'operating management'.\par
Operating management, in this context, derives from the sum of the operating income from ordinary operations, the revenues and costs from asset management, and the revenues from financial management. This sum results in determining the socalled operating income, otherwise referred to as Operating Profit.\par
As opposed to operating activity, there is, of course, what is called non-operating activity. The latter activity consists of the following: Summarising what has been said up to this point, it can therefore be stated that in the context of Profit and loss reclassified to "cost of sales and revenues", there is a dual contraposition core business vs non-core business//ordinary business vs nonordinary business.\par
To clarify the relationship between the two types of activity, the following summary is provided.\par
For this purpose, the profit and loss diagram that, for integrated business analysis \hyperref[b14]{(Avi, 2019)}, is considered complete and exhaustive is as follows. 
\section[{Profit and Loss by Integrated Information System}]{Profit and Loss by Integrated Information System}\par
Since the objective of this scheme is to investigate the performance of the typical business activity, the contraposition between expenses and revenues is based on whether the income components belong to or are excluded from the so-called area of characteristic management.\par
This contraposition has never found any reference in our legislation. In fact, at a civil law level, due to the influence of international standards, those who draw up financial reporting have always been forced to set costs and revenues against each other in other ways, which will be discussed in greater detail in the following pages. Legislative Decree No. 127/91, which substantially modified our legislation on financial reporting concerning the pre-1991 period, was welcomed by most scholars and practitioners as a legislative event marked by favourable positive elements insofar as it was characterised by "innovative" information potential, aimed above all at harmonising financial reporting at a European level.\par
Despite the fact that the content of Legislative Decree No. 127/91 has been the subject of numerous circumstantial criticisms, many authors have pointed out that an appreciable element of the legislation in question could be identified in the fact that it, as a rule deriving from a supra-national will, should have led to an accounting harmonisation, and therefore, to a comparability of the values contained in the various European financial statements. In reality, however, this did not always happen.\par
The initial interpretative difficulties (later, as we shall see in the following pages, at least partially overcome by the issuance of national accounting standards issued to disseminate correct interpretations of the concept of ordinary and extraordinary nature of costs and revenues) concerning Legislative Decree 127/91 have sometimes represented a serious obstacle, not only to the global and European standardisation of financial statement disclosures but also to the 'harmonisation' and comparability of the financial statements bound by companies operating in our country.\par
An element that, especially in the past, has certainly been an obstacle to the harmonisation and comparability of financial statements and, following the entry into force of IRAP, to an unequivocal and objective determination of the basis of the new tax is to be found in contrast between ordinary and extraordinary income elements provided for in Article 2425 of the Civil Code.\par
The separation of ordinary and extraordinary management presented (and perhaps still does) a pronounced interpretative problem.\par
For this reason, to homogenise the interpretation of the concept of ordinary activities, the national accounting standards intervened on two different occasions: firstly, document no. 12, Composition and layouts of the financial reporting of mercantile, industrial and service companies was issued in 1977 and definitively updated by the OIC in May 2005.\par
This was followed in 1998 by Principle I 1 Interpretation Series, which the OIC also updated in May 2005. These accounting standards addressed, among other things, the problem of identifying the dividing line between ordinary and extraordinary items of income.\par
The forerunner of these standards was the International Accounting Standards Committee (IASC), which, in Document No. 8, updated for the first time in 1993, explicitly established the method of separating costs and revenues from ordinary operations from income components of an extraordinary nature.\par
In 2003, the IASC issued a new version of Principle No. 8 and Principle No. 1, completely changing the international landscape of separating and recognising ordinary and extraordinary income components.\par
In the following pages, the evolution of the concept of ordinary and extraordinary income components will be discussed in detail. The potential development of the issue in our country will be highlighted. 
\section[{II. Ordinary and Extraordinary Management: Historical Excursus of the Evolution of Doctrinal Positions and Legislation in Italy}]{II. Ordinary and Extraordinary Management: Historical Excursus of the Evolution of Doctrinal Positions and Legislation in Italy}\par
While the contrast between typical vs nontypical costs and revenues does not pose any particular interpretative problems, the demarcation line that separates the 'ordinary' from the 'extraordinary' area is characterised by a large 'grey' area that presents a problematic nature that has already been underlined in the past by numerous scholars of business economics.\par
Before examining the different theoretical positions expressed by Italian scholars, it is worth emphasising how the distinction between ordinary and extraordinary income components was made by the doctrine concerning both operating income and overall business income, i.e. the total income determined throughout the life of the business.\par
"There are income components to be included among the extraordinary ones when referring to business income and among the ordinary ones when referring to overall business income. For example, the revaluation of a plant dictated by the fact that high depreciation charges had been calculated in the preceding financial years constitutes an extraordinary component of income in the financial year in which it is made (since it represents an adjustment of costs of the Onida, concerning this contrast, pointed out how "classification is made -both in doctrine and in practice -with criteria that are not infrequently dissimilar: thus, for example, income components that do not derive from the usual or typical activity of the enterprise or that are not repeated periodically or regularly, or that appear unpredictable, are sometimes considered extraordinary" \hyperref[b60]{(Onida, 1951)}. Already several decades ago, a great Maestro emphasised clearly and unequivocally how doctrine interpreted the ordinariness /ordinary nature of income items in a profoundly differentiated manner. 
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Volume XXIII Issue IV Version I Year 2023 ( ) A © 2023 Global Journals previous years), but not of the overall income of the enterprise. For this calculation, the revaluation enters as an ordinary component since it is a normal fact that the plant must have an impact on the overall economy of the undertaking for a value equal to the original value (possibly increased by capitalised costs) less any realisation value at the time of elimination of the assets from the undertaking; that is, for a value equal to the sum of the depreciation charged in different financial years, less the revaluation surplus and the realisation value' \hyperref[b63]{(Vivarelli, 1986)}.\par
In most cases, however, the contraposition between ordinary and extraordinary income components occurs concerning the income earned during a financial year.\par
In this regard, one may recall how Zappa considered it essential to contrast ordinary and extraordinary income components to assess an enterprise's economic situation. According to this author, 'ordinary is the income that results from the operations in which the company's profit-making activity is carried out according to the usual lasting order of things. On the other hand, extraordinary are components of income that are essentially notable, occasional, not destined to renew themselves, because the circumstances from which they derive are sporadic and non-recurring" \hyperref[b67]{(Zappa, 1954)}.\par
Zappa points out, however, at the same time, how it is not easy to enunciate, in an analytical and specific manner, the dividing line between ordinary and extraordinary management. The author emphasises how this depends on the company's peculiar activity. The scholar also points out that the following cannot be used as a discriminating element between ordinary and extraordinary business activity:\par
1) Nor the regularity or periodicity with which the transactions intended to be recorded in the accounts occur 2) Nor the possibility of a forecast 3) Nor the speculative nature 4) Nor the greater or lesser degree of inherent risk.\par
Although the view expressed that it is impossible to precisely and analytically determine the dividing line between extraordinary and ordinary income and expenses, Zappa attempts to identify five categories of unquestionably extraordinary income. 1) Variations resulting from an exceptional order of business on the part of the administration or from unusual individual operations, 2) The variations fortuitous is due to chance or the conjuncture; of these variations, under the name of contingencies and non-existences, it is sometimes desired to make a category of extraordinary income components\par
3) Changes adjusting costs and revenues recognised in past years, when the accounts expected to be accrued already extinguished, 4) The recognitions that could be placed in class 3, which recognise differences between the account values already attributed to specific fixed assets, the actual proceeds from their sale, when, due to a change of use, they become part of the liquid assets 5) Variations resulting from changes in the criteria applied to the valuation of assets" \hyperref[b67]{(Zappa 1954)}.\par
Despite the fact that the scholar had pointed out a demarcation line, albeit generic and not stringent, and had simultaneously identified five categories of unquestionably extraordinary income and expenses, he expressed the opinion that the distinction and contrast between ordinary and extraordinary costs/revenues often encountered serious obstacles at both practical and theoretical levels , not only because of the difficulty of identifying a separation criterion valid for all entrepreneurial entities, but above all because, understanding the company as a unitary system, whose income is the indistinct and overall result of management, it could be arbitrary to distinguish and contrast income components in various categories that are different from each other.\par
Amodeo, carrying out an analysis partially different from the previous scholar, interprets 'extraordinary and unpreordained events' as a particular 'group of phenomena extraneous to management, which must be accounted for in a single account called 'contingencies and non-existences' \hyperref[b12]{(Amodeo, 1970)}.\par
A partially different opinion is expressed by Ferrero, who, addressing the issue of reclassifying profit and loss for internal management purposes, identifies 5 management macro-areas, which can be summarised as follows 1) Characteristic or typical management, in relation to which operating investments and related negative operating income components are identified, also known as the operating area. This area includes every operating operation interrelated to the characteristic or typical business activity; 2) Non-operating management area, which in turn is subdivided into: a) Financial management, understood as the set of transactions carried out during the financial year and connected to the financing and liquidity policies of the company management; b) Atypical management, interpreted as the set of transactions not related to the company's core business and which therefore identify investments, costs and revenues belonging to an autonomous area; c) Extraordinary area, which can actually cover both the operating area and the area of atypical business activities. In this area, the author includes all nonrecurring operations producing positive and negative effects, the highlighting of which satisfies the need not to alter the meaning of the results of ordinary operations, whether operating or typical; d) Area of tax charges including income taxes for the year.\par
A further approach regarding the contrast between ordinary and extraordinary income elements has been expressed by De Dominicis, who argues the need to separate components of an ordinary and extraordinary nature to better interpret the company's situation. In particular, this author believes that the purposes of this distinction can be summarised as follows: 1) To correctly judge the economic result achieved in given financial years 2) To control management 3) To set and control sales prices 4) Calculating partial or analytical economic results of individual products or product groups 5) Making cost-effectiveness judgements on implemented productions 6) To calculate the income available for consumption or to be allocated to other production activities 7) To evaluate the economic development of the economy in question by comparing incomes in the different years \hyperref[b22]{(De Dominicis, 1966)}.\par
De Dominicis, identifies the dividing line between ordinariness and extraordinariness of income components in the character of the periodicity of costs and revenues. "For the condition of periodicity to occur, it is necessary and sufficient....... that components of income, i.e. revenues and costs, can be repeated in the future, insofar as they derive from a permanent source or productive force, i.e. labour, capital or both" (De \hyperref[b22]{Dominicis, 1966)}.\par
Therefore, the occasionality and non-frequency of occurrence identify the extraordinary components, while the character of recurrence and periodicity defines the ordinary cost or revenue.\par
To precisely identify the extraordinary elements, the scholar makes a list, albeit not exhaustive, that gives an insight into his basic theory regarding the ordinariness and extraordinariness of income components. According to the author, income components arising from: 1) Random events 2) Occasional transactions 3) adjustments to costs and revenues of previous years 4) Disposals of factors of production.\par
Based on this identification of costs/revenues, the scholar identifies four categories of extraordinary items of income. a) Costs/revenues of chance events b) Realised gains and losses c) Revaluations write-downs d) Other adjustments to costs/revenues of previous years.\par
As can be seen from the above definitions, De Dominicis places particular emphasis on the circumstance that income is closely linked to production and, in essence, derives from this process. For this reason, this author, through the juxtaposition of characteristic accessory management and extraordinary income components, set himself the objective of comparing, on an inter-temporal and inter-spatial level, the economic efficiency and effectiveness of production characterising the enterprise under attention.\par
Other scholars have also adopted this author's opinion. Gabrovec Mei, in fact states that "the phenomenon of the extraordinary is not additional: there is no extraordinary business activity, but only the possibility of measuring the income impact of the occurrence of extraordinary events concerning the two fundamental classes of characteristic and accessory activity" Gabrovic \hyperref[b16]{Mei,,1992)}.\par
In addition to the positions mentioned above, it must remember that part of the economic doctrine holds that "the distinction between ordinary and extraordinary is not always (is) easy...... generally, to simplify the problem, the following threefold distinction is made. Finally, some assert that ordinary activities are to be understood as those usual and continuous activities, or potentially, understood in a realistically broad sense, which the enterprise carries out to achieve its purposes. Da quanto sopra riportato, si può comprendere come, fra gli studiosi italiani, non sia individuabile un'opinione unanimemente accettata in merito alle caratteristiche che devono individuare gli elementi ordinari e gli elementi straordinari di reddito.\par
The contrast between ordinary and extraordinary costs and revenues is left to the personal and subjective opinion of the scholar, who sometimes delves into the issue of separating the various types of income components.\par
As we have been able to highlight briefly, Italian scholars' positions on identifying the ordinary area to be set against the extraordinary part of operations are highly varied. As we shall see later, in this regard, it may be helpful to refer to international standards, even though, as we shall see in the following pages, the international position certainly does not help to resolve the problematic nature of the separation between ordinary and extraordinary components, or rather, at present, the IAS-IFRS standards fix the issue at its root The distinction, therefore between ordinary and extraordinary, at present, is characterised by two elements: 1) If we probe the doctrinal opinions, we can see that there is an extensive grey area that makes it very complex to place items in the proper management area correctly 2) If we refer to the current international standards, there is no longer an extraordinary area as everything must be included in ordinary management.\par
Both in the event, therefore, that one accepts the existence of such a juxtaposition, and if one adheres to IFRS standards and, in essence, rejects the possibility of extraordinary income components, it is easy to understand how the division between ordinary and extraordinary costs/revenues does not identify a proper juxtaposition to investigate the profitability performance of companies. The difficulty of reclassification on the one hand, or the non-existence of a reference aggregate (extraordinary items) on the other, prevent a complete, exhaustive and, above all, meaningful analysis from being carried out.\par
Despite this, there is no doubt, however, that as long as our legislation refers to the separation between ordinary and extraordinary income components, it is necessary to try to understand the dividing line between these values, both from a purely theoretical-doctrinal point of view and from the point of view of the provisions included in national and international accounting standards. 
\section[{III. Ordinary and Extraordinary}]{III. Ordinary and Extraordinary}\par
Management: Current Civil Law Aspects (Prior to Current Reform) and Economic Aspects National Accounting Standards in Italy and IAS no. 8 before the 2003 Reform\par
The issue of the separation between ordinary and extraordinary income elements, although it has always aroused interest at the doctrinal level, became the subject of particular scrutiny when, with Legislative Decree 127/91, the articles of the Civil Code concerning the structure of financial statements were amended.\par
While in the period before 1991, the issue concerning the separation between ordinary and extraordinary income elements represented, in our country, a subject of academic studies focused on the IAS international standards, after the Fourth Directive came into force in Italian law, this contrast began to become a qualifying element for the legitimacy of financial statements. For this reason, the topic started to arouse interest among scholars and the preparers of financial statements.\par
In this regard, it is worth noting how the identification of the discriminating line of typicality (interpreted as belonging to the activity for which the company was set up)/typicality of the financial reporting items leads to the determination of two different sets concerning the result obtainable if the demarcation line is made to coincide with the possibility or otherwise of forecasting (interpreted as an enabled programme of values) the costs and revenues themselves.\par
The two classifications then lead to different aggregates concerning those identifiable if the discriminating element is made to coincide with the repetitiveness (understood as the repetition over time of the income element)/occasionality of the values themselves. It is possible to identify typical occasional factors (e.g. a one-off training course for employees), just as it is conceivable to recognise atypical repetitive costs and revenues (e.g. applications with them to a non-real estate company). The possibility of foreseeing a positive income event in advance does not necessarily lead to the value classifications mentioned above. The predictability of a value does not appear to be superimposable on either the concept of typicality or the concept of repetitiveness over time of the income element.\par
These brief considerations highlight the absence of a shared demarcation line between ordinary management and extraordinary operations. Without a strict and unified specification of reference criteria, the contrast appears permeated by an aura of vagueness that undermines its basis.\par
In transposing the Fourth Directive, the Italian legislature has imposed the subdivision in question in a manner open to specific criticism.\par
Since the juxtaposition between ordinary and extraordinary values implies a different placement of data in profit and loss, and since the informative capacity of the financial reporting itself is linked to the correct reclassification of these amounts, it is believed that the explication of the criteria for the breakdown of the accounts should find space, not in the report attached to legislative decree 127/91, but in the decree itself, for example happens for the identification of values belonging to current assets rather than fixed assets (Article 2424 bis I paragraph I of the Italian Civil Code).\par
The circumstance that the guidelines for contrasting ordinary/extraordinary income elements were contained in an accompanying report rather than in the articles of the code allowed, for several years, the preparation of financial statements drawn up with different criteria concerning the dividing line that had to be drawn between ordinary and extraordinary costs /income. 
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Before the introduction of the regional tax on production activities, a tax that only affected ordinary costs/revenues and which gave rise to the need for a complete and analytical understanding of what was to be understood by an extraordinary income component, the term ordinary/ordinary was often given the meaning of everyday language by operators. In non-accounting terminology, such a term is often associated with the repetitiveness of events. Therefore, the occasionality /repeatability of management operations appeared to be the only element to which financial reporting writers essentially referred.\par
It should note, however, that this circumstance was not connected to an in-depth analysis of the various doctrinal theories on this subject but was, instead, frequently attributable to a substantial lack of knowledge of the interpretative problems raised by Italian legislation.\par
Perhaps, in this case, the conditional is obligatory; directly in the law, the basic principle of classification of ordinary and extraordinary income items could have promoted a wider dissemination of knowledge of the intrinsic problematic nature of the civil law positioning of such things.\par
The Italian legislator's choice regarding the contrast between ordinary and extraordinary elements of income indicated in the report attached to Decree 127, is summarised in the following principle: 'the adjective extraordinary, referring to income and charges, does not allude to the exceptionality or normality of the event, but rather to the extraneousness of the source of the income or charge to ordinary activities'.\par
Identification of ordinary and extraordinary areas of management: CIVIL CODE IN FORCE FROM 1991 TO 2015 E) Extraordinary income and expenses 20) income, with a separate indication of capital gains on disposals whose revenue cannot be entered under no. 5 21) expenses, with a separate indication of capital losses whose accounting effects cannot be entered under no. 14, and taxes relating to previous years. There is no explicit reference in the civil law articles in the strictly regulatory sphere. Art. 2425 of the Civil Code, therefore, separated ordinary and extraordinary items of income without providing a precise definition of these terms REPORT ACCOMPANYING LEGISLATIVE DECREE 127/91 "the adjective extraordinary, referring to income and charges, does not allude to the exceptionality or normality of the event, but to the extraneousness of the source of the proceeds or charge to ordinary activity".\par
This explanation, on a superficial reading, may seem tautological. Indeed, the report defines extraordinary as what is not ordinary without giving a comprehensive, unambiguous and precise indication of what should be considered ordinary items of income. This apparent shortcoming has been pointed out as one of the leading causes for limiting the informative capacity of financial reporting for publication.\par
On the other hand, a less superficial reading shows how the explanation is not tautological at all but makes a blank reference to well-known but prevalent overseas concepts not specified in the report itself.\par
As noted in the preceding pages, the doctrinal opinions of Italian scholars on the concept of ordinary and extraordinary income components of financial statements are varied and diverse.\par
Given the variety of doctrinal opinions expressed on this subject and the lack of a shared and unanimous interpretation of the concept of ordinary or extraordinary income components, it became necessary to refer to generally accepted accounting principles.\par
However, the Italian situation in 1991 was characterised by the lack of accounting principles that addressed this issue analytically. For this reason, the only point of reference, although we shall see that it did not apply to the Italian situation due to incompatibilities with the civil code articles, was the representation of international accounting standards.\par
It should note that the definition of the extraordinary item indicated in the report attached to Legislative Decree 127 was characterised by an undeniable 'terminological analogy' concerning what was established by IAS standard No. 8 in force at the time.\par
This principle states that 'whether an event or transaction I distinct from the ordinary activities of the enterprise is determined by the nature of the event of the transaction about the business ordinarily carried on by the enterprise rather than by such events are expected to occur'.\par
The consideration of the analogy identifiable between the provisions of IAS No. 8 in force in the period considered here and the content of the report attached to Legislative Decree No. 127 could have led to the erroneous conclusion that, to settle the dispute concerning the correct interpretation of the phrase "ordinary activities", it would have been sufficient to transpose, automatically, into Italian law what was established by the international standards.\par
The Italian legislator rejected such a solution since Article 2425 established that taxes relating to previous years must always be indicated in item E21extraordinary expenses -. IAS No. 8, on the contrary, on the recognition of determinant errors, which may also concern the calculation of taxes relating to previous periods, established that these do not necessarily fall within the income elements of an extraordinary nature. The inclusion of prior-year taxes by the civil law legislator within the extraordinary area was one of the elements based on which it was possible to deny the possibility of the complete transposition of IAS into national law. This, however, was not the only element preventing the automatic and uncritical translation of international standard No. 8 into Italian reality.\par
In this regard, it must be emphasised that IAS No 8 (before the 2003 reform) dealt with two particular issues:\par
1) The modification of accounting principles 2) The correction of errors In addressing both issues, IAS No. 8 (pre-2003 reform) assumed two potential accounting treatments for the above transactions: a) Benchmark treatment: the effects of the change in accounting policy or the determinative error are reflected in the initial equity reserves; b) Allowed treatment: the effects of the change in accounting policy or the determining error are charged to profit and loss so that the consequences of the change are reflected in net income for the year.\par
The key feature of the benchmark treatment was that any adjustments resulting from the change in accounting policy or errors must -obligatorily -be recognised as a change to the opening balance of retained earnings, i.e. the reserves in the opening balance sheet.\par
Even the comparative information of the previous year concerning the closing year must, as far as possible, be revised in light of the change in accounting principles. Therefore, according to this methodology, the financial reporting for the year, including the comparative information for previous years, should have been presented so that the change relating to earlier years adjusts the opening balance of the retained reserves of the first year presented. If the reference treatment of IAS No. 8 had been adopted, the recalculation of comparative information did not involve the shareholders' correction of the financial statements approved in previous years. This recalculation only represented additional information in the financial reporting of the closing financial year.\par
IAS No. 8 before the 2003 reform, after illustrating the reference treatment, explained the socalled allowed treatment, i.e. the treatment that, while not representing the recommended methodology, identified what constituted an 'acceptable' criterion for international standards. According to the allowed treatment, the adjustments resulting from the change in accounting policy or the determining errors were to be included in determining the profit or loss for the financial year ending without, in this case, modifying the retained earnings at the beginning of the financial period.\par
The comparative information should have been presented without any adjustments. The relative information adjusted according to the reference treatment, if practically feasible, would be entrusted to a proforma document. This consideration led the Consob (Communication No. 99016997 of 11/3/99 and No. 990 59009 of 30/7/99) and the Banca d'Italia (Communication of 3/8/99) to intervene with explanatory circulars and communications on the treatment to be applied by listed companies and credit institutions respectively.\par
Consob and the Banca d'Italia agreed that the accounting treatment 'preferred' by IAS No. 8 was not applicable under Italian law.\par
The recording of the effects of the change in accounting policies on the opening balances of equity reserves contradicts the dictates of Articles 2423 and 2423 bis of the Italian Civil Code. In particular, it must be remembered how the application of the benchmark treatment, with the change in the initial amount of the reserves included in the balance sheet, would conflict with some fundamental rules of our legislation that can be summarised as follows:\par
? First, the financial statements are characterised by the principle of continuity, according to which the opening balance sheet must correspond to the closing balance sheet of the previous financial year. Although, formally, the adjustment of the reserves would take place in a financial year after the one in which the new criterion should have been applied, and therefore the opening balance of the funds in question would correspond to the closing balance of the previous financial reporting, however, the substance of the adjustment would indicate the opposite; ? Secondly, it should be borne in mind that, under Italian law, revenue reserves are formed by a resolution of the shareholders' meeting simultaneously, even if separate from the approval of the financial statements. If the methodology recommended by IAS No. 8 were to be applied, the shareholders' meeting called upon to approve the financial reporting of the year in which the adjustment is implemented would find itself supporting a change in reserves that occurred without the shareholders' meeting's previous resolution.\par
For these reasons, it can be said that the benchmark treatment has never been applicable within the Italian legislative reality.\par
In light of these considerations, document No. This position reiterated what had been established in two previous CNDC-CNR (National Council of Chartered Accountants and Auditors) documents. Accounting Principle No. 12 Composition and format of financial reporting for the financial year of commercial, industrial and service companies, already in 1994 identified extraordinary costs/revenues as income components resulting from changes in the accounting principles adopted, a circumstance also reiterated by the CNDC-CNR -I 1 Interpretation Series issued in 1998.\par
Of particular importance was the consideration that, even if the preparer of the financial statements had opted for the application of the treatment allowed by IAS No. 8 before the 2003 reform, according to the international standards, the values to be recognised in financial reporting should have been entered under ordinary income items and not under extraordinary income and expenses, as the view of the ordinary /extraordinary nature of operations in IAS No. 8 provided that such costs/revenues should, necessarily, fall within the ordinary area.\par
Interpretative Document 1, on the other hand, listed in Section E the costs and revenues considered above. From here, there was an unbridgeable difference between the concept of ordinary/ordinary applicable in our country and the same theoretical reference used in the IASC.\par
At the time of the enactment of Legislative Decree No. 127/91, no national accounting standards had yet been issued to support ordinary management. The incompatibility between the Italian Civil Code and IAS No. 8 in force in the period considered here, however, was already identifiable by considering the location of taxes from previous years, which, for the IASC, had to be entered in the area of ordinary management, whereas, for Article 2425 of the Civil Code, they had to be entered in the area of extraordinary charges.\par
From these considerations derived the impossibility of interpreting Italian civil law employing automatic transposition of the postulates indicated by the International Standard Committee.\par
The decision not to transpose principles drawn up in different countries into the Italian reality was applauded by most business scholars. Many authors agreed and still agree that applying principles that can fully share in the context of a given economic, social and political reality may not lead to equally positive results when carried out in structurally different countries.\par
Bearing these considerations in mind, the Italian legislator deemed it appropriate to reread, in a partially differentiated key, what had been established by principles and business economics that were influenced by the experience of foreign countries.\par
A reading of IAS No. 8 shows how the hypotheses in which the possibility of the occurrence of an extraordinary income element can be glimpsed are extremely limited. According to the view of the standard in question, ordinary operations include only the activities performed by an enterprise as part of its ordinary operations and the other activities related to the former, committed to support its ordinary operations or which are acquired as a result. In identifying operational examples in which an extraordinary element of income would be substantiated, the principle itself refers to natural events, such as earthquakes, or exceptional circumstances, such as expropriation for public utility.\par
One can understand how the acceptance in our country's legislation of such a restrictive interpretation of the concept of extraordinary would have caused two consequences: In Document No. 12, the commission had opted for a detailed accounting of values that helped safeguard the informative capacity of the 'ordinary' A-B aggregate. As mentioned above, the document stated verbatim that the accounting of capital gains and capital losses should be carried out in such a way as "not to distort the technical meaning of the intermediate value indicated by the legislator as the difference between value and cost of production".?\par
The national accounting standards, in document No. 12, identified extraordinary items as those values that derived from transactions or events that had a significant effect on the structure of the company (e.g. sale of company branches of a considerable part of shareholdings); or that were connected with the sale of civil real estate or other assets not instrumental to production, commercial or service activities and not about financial management.\par
As can be understood from these notes, the original definition of the ordinariness/extraordinariness of income elements accepted by National Accounting Standards document No. 12 appeared to be characterised by two factors:\par
Firstly, national accounting standards emphasise the relevance of the source of the income or expense. In this view, the start of the event to be accounted for represented the discriminating element between ordinary and extraordinary activities. Subsequently, however, Document No. 12 emphasised that the "insignificance" or "materiality" of the cost of the income constituted a further element of judgement.\par
Capital gains of minor capital losses were to be entered in aggregates A and B, in contrast to income and expenses that were significant in terms of value concerning all company assets, which, obligatorily according to the accounting principles, had to be entered in the statutory aggregate E.\par
This stance on accounting principles had two consequences: * On the one hand, the attempt to avoid the drastic reduction of the informative capacity of the A-B aggregate that would have unduly derived from the inclusion in the ordinary values of "polluting" elements such as, for example, income from occasional charges of a significant amount, appeared praiseworthy * On the other hand, it is not possible, however, to avoid noting how this rule of conduct, subsequently modified precisely because of its illegitimacy, presupposed the application of a reclassification criterion that indirectly, created differences in recognition according to the values considered, the CNDC-CNR principle No. 12 provided that the same event could give rise to extraordinary values or ordinary items depending on the amount involved. For example, the sale of real estate would have created an ordinary value if the gain or loss was small or, conversely, would have had to be recorded as an extraordinary item if the income or expense was significant.\par
The principle thus presupposed that a transaction of the exact nature, qualitatively identified (sale of real estate), could be made to fall either under ordinary or extraordinary management, depending on the amount involved.\par
According to the CNDC-CNR document No. 12, ordinary costs and revenues were to include, among other things, "income and charges represented by capital gains and losses relating to the sale of capital goods used in standard production, trade or services activities that are disposed of as a result of technical and economic deterioration, and of a low significance concerning all capital goods used in standard production, trade or services activities and in any case of an amount such as not to distort the technical meaning of the intermediate value indicated by the legislator as the difference between the value and cost of production." If significant amounts had marked the values, ordinariness would have automatically turned into extraordinariness without any possibility of differentiated interpretation. This does not create any theoretical problems since, from this application, a concept of extraordinary related to the exceptionality of the amount transpires.\par
The question remained, however, as to whether the application of this principle could be said to be consistent with the wording of the law, or rather the content of the report attached to Legislative Decree 127, which explicitly stated that the exceptionality of amount could not be considered a relevant element to identify extraordinary items of income.\par
Reading the civil law articles and the report accompanying the decree, one understands that the legal reference is to be understood because the source of the income component is the discriminating element that requires a specific classification of the cost or revenue involved in the accounting entry.\par
It can be understood at this point how the position initially adopted by the National Council presupposed the application of a graduated principle depending on the items taken into account. For operating grants and write-downs, what would be relevant for reclassification would not be the amount but solely the qualitative-managerial source of the transaction put in place by the company, whereas, for other values (e.g. capital gains and losses). However, the source of the transaction was the same; different placements depended on the amount involved, which therefore represented, to all intents and purposes, a discriminating element for recognition.\par
This circumstance raised doubts as to the complete legal legitimacy of principle No. 12 since, based on the content of that document combined with the legislative provisions concerning, in particular, operating subsidies AND fixed asset write-downs, the accounting items would, in essence, have been reclassified according to different criteria.\par
It is well known how the relevance attributed to the values that, alternatively, according to this original position of the Consiglio Nazionale di Dottori Commercialisti -Collegio dei Ragionieri, could have been placed within the scope of ordinary extraordinary management, was intended to ensure that the differential aggregate A-B could have a management significance.\par
While sharing this concern, however, the principle outlined in Document No. 12 laid the foundation for a legal illegitimacy of the postulate indicated in the code itself regarding the dividing line between ordinary and extraordinary items of income.\par
In commenting on CNDC-CNR Accounting Principle No. 12 in the past, it was pointed out that the attention of the preparer of financial reporting should not have been focused on the amount but exclusively on the source of the income or expense. Therefore, an unambiguous reclassification of the income element should have matched a single source.\par
This interpretation was supported by Document No. 12 itself. The accounting principles stipulated that contingencies and non-existences relating to estimated values that did not result from errors (e.g. surpluses of premium reserves, guarantee reserves and risk reserves) should, in any case, be recognised in item A5. Explicit considerations regarding the contingency amount did not influence this entry.\par
The question then arose as to why the 'insignificance' of the value should interfere with recognising only capital gains and losses and not other income items.\par
It was always affirmed that the source of income and expenses should assume the role of the only relevant element for statutory reclassification since it appeared illegitimate to apply accounting behaviour that, in the total absence of analytical specifications of the law, provided for the application of different postulates or methods of recognition depending on the item being recognised in the financial statements. It has always been argued that each item mentioned in financial reporting should be made according to the same 'accounting rules'.\par
According to this interpretation, which does not contain any elements of incompatibility with civil law, capital gains and losses connected with the physiological turnover of fixed assets should always have been interpreted as ordinary income elements, even if significant amounts marked them.\par
The inconsistency of Accounting Principle No. 12 concerning the ordinariness/extraordinariness of capital gains and capital losses was pointed out by the National Council of Accountants and Bookkeepers in Principle I 1 Interpretation Series.\par
In that interpretative accounting principle of document No. 12, a significant change was made concerning what had previously been established, a change that many scholars missed as being inconsistent.\par
However, in the writer's opinion, this change represented a quantum leap in national accounting standards. It allowed the elimination of a principle that could have cast doubt on the legal legitimacy of the principle itself and, thus, its application in the Italian civil law context.\par
In principle, I 1 Interpretation Series, any reference to the relevance of the amount of capital losses and gains was eliminated.\par
As had been hoped for in the past, the accounting standards have ensured that the recognition Document No. 12 provided that the exceptionality of the amount was only relevant for values that could be entered under items A5, E21, or B14-E21.\par
However, the law requires that operating grants and write-downs be recognised in items A5 and B10, regardless of the figure. Therefore, both of these items must always be regarded as values that are, for all intents and purposes, part of ordinary business. of capital losses or capital gains is linked, regardless of the amount involved, exclusively to the source of the transaction from which the income or expense arises. Therefore, the quantitative-monetary level of the trade no longer has any relevance for the correct legal classification of capital gains or losses. The placement of the accounting entries must be made with exclusive reference to the source of the income or charge, and therefore free from any consideration of the relevance of the amount, in addition to fully respecting the civil law dictate, has allowed the achievement of an elementary, as much as desirable, objective of a tax nature.\par
Total objectivity' can hardly be counted among the characteristics that characterise the taxable base on which income taxes are calculated. One thinks, for example, of the subjectivity of the concept of entertainment expenses, a cost that is, in fact, frequently the subject of tax recovery.\par
If, however, on the one hand, such 'absolute objectivity' cannot be achieved -for reasons intrinsic to certain balance sheet items -on the other hand, it appears desirable that the efforts of all scholars and tax operators be focused on achieving a common objective identifiable in the maximum possible reduction of any element that may represent an obstacle to the 'certainty' and 'objectivity' of the determination of the taxable base. " Inequivocability ", even if necessarily tempered for the reasons mentioned above, represents every taxpayer's elementary and ineliminable right.\par
The letter of Articles 4, 5, and 11 of the decree establishing the regional tax on productive activities, interpreted in the light of the statements contained in document 12 CNDC-CNR, contained elements that, if underestimated, could have led to a gradual move away from the objective of 'certain' determination of the IRAP taxable base.\par
When the law establishing the tax was enacted, the tax legislature had underestimated the scope of the interpretative doubts concerning the dividing line that could be drawn between ordinary and extraordinary activities.\par
If, on the one hand, as explicitly provided for in the legislation, it was inevitable that the taxable base of the regional tax on productive activities should not be affected by extraordinary operations, on the other hand, it was equally clear that the determination of a tax that could not be subject to possible recovery by the tax authorities presupposed the precise and unequivocal identification of the taxable base.\par
The automatic shifting of the principles contained initially in Document No. 12 of the National Council of Chartered Accountants did not seem to identify the correct solution to overcome the objective determination of the identifiable dividing line between ordinary and extraordinary costs and revenues. Document No. 12, concerning the different collocation of the items related to the amount of the same, referred to a principle that appeared to be intrinsically not determinable objectively.\par
The 'insignificance concerning the totality of capital goods used for normal production activity' did not delimit the elements of ordinary income in a sufficiently precise and unambiguous manner. Such a situation would probably have created a potential mass of tax recoveries at the time of assessment with a consequent possible group of appeals to the tax commissions.\par
The reference, even if not shared by all scholars, of the accounting standards to the 'insignificance' of values could, therefore, only raise critical considerations regarding the lack, within this concept, of a hypothetical 'total and absolute objectivity'.\par
The in-depth analysis of financial reporting as an instrument of information to the outside world and the study of the document as an instrument of taxation leads to the rejection of the acceptance that such subjectivity can find a place within the scope of civil and tax law. For these reasons, the lack of connection between the ordinariness and extraordinariness of the elements of income and the 'relevance of amount' that the pieces themselves represented was the only way that could comply with the civil law dictate and, on the other hand, correspond to the elementary need for certainty in determining the tax base.\par
Precisely to satisfy this need for objectivity and certainty in determining extraordinary items of income and, consequently, defining the concept of ordinary activities, the accounting standards intervened with the I 1 Interpretation Series.\par
According to Principle I 1 Interpretation Series updated in 2005, the following were to be considered extraordinary items of income: a) Charges, capital gains or losses on transactions with significant effects on the structure of the company: in previous years (e.g. amounts of provisions for risks and charges revealed both on the guarantor and the condition made); d) Sundry revenues and income of a non-financial nature. These are revenues and income not recognisable under other headings, such as reimbursement of expenses penalties owed by customers, etc... This item includes revenues for the definitive acquisition of deposits for companies operating in markets where the payment of deposits after each contract, whether explicit or preliminary, is customary, such as, for example, for car dealerships or construction and sale companies of various types, insurance reimbursements should also be included, when they repay claims that have not led to the recording of extraordinary charges. In the latter case, instead of insurance reimbursements, they constitute extraordinary income to be recognised under item E20.*\par
The following items, among other things, are to be included in item B14: a) Costs arising from ancillary operations such as, for example, maintenance management costs of civil furniture, management costs of any farms that cannot be allocated to other items, maintenance costs of repairing machinery leased to third parties; b) Capital losses on the disposal of capital goods used in the ordinary course of commercial production of services. The replacement of capital goods, tangible assets, must be physiological and occur, as noted for item A5, due to the technical and economic deterioration suffered by the assets in the exercise of the regular production activity of the enterprise and not due to an extraordinary event.\par
Otherwise, capital losses will be extraordinary in nature and must be recognised under aggregate E: c) Out-of-period losses relating to estimated values that do not result from errors. These are upward adjustments to costs caused by the normal updating of estimates made in previous years, such as insufficient provisions for risks and charges, and losses on receivables related to working capital not covered by previous write-downs. Finally, it should remember that the CNDC-CNR accounting standard No. 29, updated by the OIC in 2005, addressed the issue of recognising extraordinary income and expenses.\par
In particular, it analysed the accounting consequences of extraordinary transactions and events.\par
The economic result for the year could be significantly affected by extraordinary events that, even if they occurred during the year and therefore about the same year, may, if their effects are not identified and quantified, not allow a correct view of the company's economic performance and may significantly alter the assessment of the company's profitability under normal conditions.\par
According to the CNDC-CNR national standard No. 29, updated by the OIC in 2005, events or transactions were to be considered extraordinary when both of the following conditions were met (a) The events are causal and accidental, and the transactions, whether or not related to such events, are outside the ordinary course of business. The extraordinary nature of the event or transaction is to be determined according to its nature in relation to the ordinary activities of the enterprise. Accordingly, circumstances which, although accidental and nonrecurring in their occurrence or amount, are connected with the ordinary course of business are excluded; (b) The events or transactions are infrequent. In connection with the preceding, it should note that the ordinary activities of the enterprise should not be confused with its characteristic activities. Ancillary activities ordinarily carried out by the enterprise to supplement its income or because they are connected in various ways to the enterprise's main activity can often take place. The economic effects of incidental and non-recurring activities will be recognised, depending on their nature, under production value and costs or financial income and expenses.\par
Strikes, on the other hand, were not to be considered extraordinary events or operations, even if they were of a significant entity, since they were part of the business risk, profits and losses from exchange rate fluctuations, losses on receivables, even if they were of a significant entity, and the settlement of disputes if they were of a recurring nature and pertinent to the ordinary management of the business.\par
Regarding correctly placing items related to extraordinary transactions and events, the amended national accounting standard OIC 29 considered it proper to include them under extraordinary income and expenses. 
\section[{IV. Ordinary and Extraordinary}]{IV. Ordinary and Extraordinary}\par
Management in International Standards: IAS 8 and IAS 1 Post 2003  Reform\par
As noted in the preceding pages, the contrast between extraordinary income and expenses and ordinary costs/revenues at the time of the enactment of Legislative Decree 127 had, as its only point of reference, IAS standard No. 8 before the 2003 reform.\par
Although this international standard could not be applied to the Italian situation due to incompatibility with national legislation, it constituted a point of The elimination of the reference to costs and revenues for the period indicated a desire to address no longer the issue of separating ordinary and extraordinary management.\par
In explaining the proposed changes to Statement No. 8, the International Committee had highlighted its intention to remove certain parts of Statement No. 8 that concerned the presentation and recognition of revenue costs in profit and loss. Hence the change in the title of IAS No. 8. These appropriately amended paragraphs were re-proposed in IAS No. 1 Presentation of Financial Statements in force in the period under review.\par
In that standard (IAS 1 post-reform 2003 ), the IASC took a completely different position from that resulting in the original IAS No. 8 revised in 1993.\par
In paragraph 85, it states that an entity should not present income and expenses as extraordinary items either in the statement of profit and loss or in the notes.\par
An analysis of these concepts shows how the IASB eliminated the dividing line between ordinary and extraordinary activities.\par
In this new international view of management, everything that occurs within the scope of business operations must therefore be considered ordinary.\par
No operation carried out within management can any longer be considered extraordinary under the revised accounting standards.\par
IAS No. 1 post-2003 reform points out that, in particular circumstances, the nature and amount of cost and revenue items may suggest that they are shown and illustrated in a unique way, when their relevance is such that they represent a characterising element for the understanding of the financial and income situation of the enterprise.\par
However, this does not mean suggesting a separation between ordinary and extraordinary activities. Any business transaction that falls within the ordinary course of business activity may assume, for example, due to the exceptional entity that characterises it, relevant importance in the context of corporate disclosure.\par
Therefore, IAS No. 1 post-2003 reform did not prevent, and does not prevent even today, the highlighting of particular income elements by nature or entity, but denies that an area of management that can be defined as extraordinary can be identified.\par
This stance is in fact, part of a path that the IASC had already taken in previous years. In fact, in the opinion of the writer, having identified, in the original IAS No. 8, an extraordinary area as restricted as that specified by the international standard (and entities connected with earthquakes or expropriations for public utility) meant, in essence, considering that the absolute majority of the transactions carried out in the company's management sphere were connected with ordinary activity.\par
This indirectly meant downgrading the extraordinary area's relevance in favour of the ordinary area, even though there is no doubt that the original IAS No. 8 contained a very precise definition of ordinary activities and, residually, an extraordinary management area could therefore be identified.\par
The position set out in the documents issued in 2003 represents, in reality, a return to the origins of the economic business theory expressed by Italian doctrine. As noted in the preceding pages, while tackling the subject and proposing a subdivision between ordinary and extraordinary elements of income, Zappa considered it reasonable to make an essential premise for the study that he would later carry out.\par
The scholar pointed out how the distinction between ordinary and extraordinary income components was often impossible from a practical point of view due to the difficulty of identifying a reclassification criterion valid for all companies. After pointing out the functional problem of separating ordinary and extraordinary costs /income, he highlighted a theoretical obstacle to such a juxtaposition. Zappa pointed out that the enterprise was a unitary system in which income was the complex and indistinct result of the company's production. With this phrase, the author intended to emphasise the arbitrariness and artificiality of the claim to isolate income components in pre-constituted categories opposed to one another. "To discuss without limits the appropriateness of attributing ordinary and extraordinary, principal and accessory income components,....... (it means, note of author) distracting from the formation of income those values that one wants to judge as belonging to past years..... All this means easy consent to alterations and the obscuring of financial reporting" \hyperref[b67]{(Zappa, 1954)}.\par
V. From Extraordinariness to Extraneousness and, Subsequently, to the Simple Abolition of the Extraordinary Elements of Profit and Loss\par
At this point, it is necessary to understand the consequences of the amendments to IAS 1 and 8 approved in 2003.\par
On the one hand, Italian legislation (which was reformed in the first decade of this century) imposed, with Article 2425 of the Italian Civil Code, the separation of the ordinary from the extraordinary area and, on the other hand, prevented the treatment imposed by IAS 8 post-2003 reform from being applied in our country.\par
Obviously, given this particular situation of incompatibility of rules, the question arises spontaneously regarding the development of external communication of Italian companies.\par
Concerning the issue concerning the mandatory treatment under IAS 8 post-2003 reform concerning the recognition of changes in accounting principles and the recognition of errors, there were no proposals to amend the regulations.\par
It was, therefore, impossible, as it conflicted with Italian doctrinal and regulatory principles, to adopt the treatment IAS considers mandatory.\par
On the other hand, concerning the contrast between ordinary and extraordinary elements of income, towards the middle of the first decade of this century, doctrine began to hypothesise a different difference between negative and positive income components.\par
In the bill that was supposed to change the profit-and-loss structure, the terms 'extraordinary income and costs' disappeared altogether, and, in their place, the concepts of income and costs unrelated to the activity were introduced.\par
This change, as is evident, incorporates the evolution introduced in 2003 by the IAS standards, following which the concept of extraordinariness was radically eliminated from the 'international economic vocabulary'.\par
According to the draft under discussion, Article 2425 of the code should be 'rewritten' as follows: between items pertaining to characteristic activities and income components extraneous to the activity.\par
The accompanying report does not go into detail concerning the correct interpretation of 'extraneousness' to the activity. On a practical level, therefore, companies will include in items 18 and 19 everything that is not explicitly indicated in items 1 to 17. To avoid the improper use of the terms 'non-operating items' and to prevent the preparation of non-comparable profit and loss accounts due to the various potential interpretations of these terms, everyone hoped that the legislator, in the report accompanying the new law, would dwell analytically and not superficially on the exact performance that must attend the preparer of financial reporting in identifying so-called non-operating revenues and expenses.\par
The bill that envisaged the juxtaposition between elements extraneous to business operations and parts not extraneous to business activities was not transformed into law, and therefore, the juxtaposition between elements extraneous to business operations and elements not extraneous to business activities was never applied at the Italian national regulatory level. With Decree 139 of 2015, profit and loss was transformed into a document with no contraposition between extraordinary and ordinary elements simply by abolishing the two items that included the negative and positive elements of income of an extraordinary nature or instead defined as extraordinary in nature. In the current state of the art, all negative and positive items of income are ordinary, exactly as in IAS 1, which refers to the profit and loss structure. In the opinion of the writer, the elimination of the contraposition between ordinary and extraordinary items was welcomed as, in reality, the contraposition, as mentioned above, did not provide any interesting information for third parties outside the company. The writer also believes that it was very positive that the bill providing for the extraneousness of costs and revenues to the business activity was not transformed into law as the concept of extraneousness to the business activity would have remained a generic, superficial concept and, therefore, difficult to interpret objectively. At present, therefore, all elements of costs and revenues are of an ordinary nature. This circumstance, which, on the one hand, makes it easier to prepare financial statements, on the other hand, means that all non-characteristic elements by definition, such as capital gains and losses and contingent assets and liabilities, are included in the aggregates at 5 EB 14 in particular, which also contain characteristic costs and revenues connected with the typical business activity. This means that the profit and loss currently in force in Italy cannot be used effectively to perform a reliable financial reporting analysis since both characteristic and non-characteristic costs can be included in the same item. In the items of which positive income components are comprised, characteristic non-characteristic capital and even financial revenues can be included. 
\section[{VI. Conclusions}]{VI. Conclusions}\par
From what has been said in the preceding pages, it can understand how the regulatory evolution of the concepts connected to negative and positive income components has been rather substantial, unlike what has happened in the context of the management analysis of financial reporting, which has never deviated from the contraposition between characteristic and noncharacteristic elements. The current situation, at least in Italy, which, however, reflects the status in most countries that refer to the IAS/IFRS international standards, means that there are no extraordinary items but only ordinary costs and revenues, but that the various items envisaged by the legislator may contain elements connected with the performance of the company's typical activity and costs and revenues not related with the company's typical activity, which makes it easy to understand how, this consideration, leads to the impossibility of a complete analysis of financial reporting from outside the company, since in the absence of information on the analytical content of the items in the financial statements, it is impossible to implement an analysis by indexes and flows that would allow a complete analysis to be carried out and that would make it possible to understand the actual situation of the company. External users have seen, over time, improvements in corporate reporting. Still, although this is undoubtedly the case, they cannot carry out a complete financial reporting analysis due to a lack of information.       \begin{figure}[htbp]
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\begin{longtable}{P{0.2552233902759527\textwidth}P{0.17480289093298293\textwidth}P{0.10220105124835742\textwidth}P{0.2647174770039422\textwidth}P{0.053055190538764785\textwidth}}
\multicolumn{2}{l}{reference to identify the dividing line between ordinary}\tabcellsep \multicolumn{2}{l}{The current evolution within the IASC seems to}\\
and extraordinary activities.\tabcellsep \tabcellsep \multicolumn{2}{l}{lead to opposite considerations.}\\
\multicolumn{2}{l}{The fact that the international principle}\tabcellsep \multicolumn{2}{l}{In 2003, the IASC updated IAS No. 8 and IAS No. 1.}\\
\multicolumn{2}{l}{addressed this issue implied recognition of the}\tabcellsep \multicolumn{2}{l}{Changes regarding ordinary/ordinary income}\\
\multicolumn{2}{l}{importance of separating the income elements}\tabcellsep and expenses:\tabcellsep \\
\multicolumn{2}{l}{connected to ordinary management from those in-}\tabcellsep \tabcellsep \\
\multicolumn{2}{l}{terrelated to extraordinary management operations.}\tabcellsep \tabcellsep \\
Object of Amendment\tabcellsep \multicolumn{2}{l}{IAS No. 8 Updated 1993}\tabcellsep IAS No. 8 With Amendments Approved In 2003\\
Change of Accounting Principles Detection of Determinant Errors\tabcellsep \multicolumn{2}{l}{Choice between Benchmark Treatment (Recommended) and Allowed Treatment (Only Allowed) Choice between Benchmark Treatment (Recommended) And Allowed Treatment (Only Allowed)}\tabcellsep Obligation to Apply the So-Called Benchmark Treatment and Prohibition to use the Previously Defined Allowed Treatment Obligation to Apply Benchmark Treatment and Prohibition of using the Previously Defined Allowed Treatment Principle\tabcellsep Year 2023\\
Separation between Ordinary and Extraordinary Items of Income\tabcellsep \multicolumn{2}{l}{Ndication of the Definition of Ordinary Activity and then, Residually, Determination of the Extraordinary Area of Income}\tabcellsep Elimination, in Profit and Loss, of the Contrast between Ordinary Income and Expenses and Extraordinary Items of Income. Every Expense And Income will be Considered as Ordinary.\tabcellsep Volume XXIII Issue IV Version I\\
\tabcellsep \tabcellsep \tabcellsep \tabcellsep ( ) A\\
\tabcellsep \tabcellsep \tabcellsep \tabcellsep Global Journal of Management and Business Research\\
\tabcellsep \tabcellsep \tabcellsep © 2023 Global Journals\end{longtable} \par
 
\caption{\label{tab_5}}\end{figure}
 			\footnote{To facilitate reading, I have decided not to include in the text, except in exceptional cases, the names of the scholars who have dealt with the subject under analysis. I have opted not to indicate all the terms of the scholars in the text because this would have meant a continuous interruption of the reading of the complete sentence in which I express my thought. References are placed at the end of the article} 		 		\backmatter  			  				\begin{bibitemlist}{1}
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\bibitem[+ /-changes in inventories of finished goods and work in progress]{b0}\label{b0} 	 		\textit{+ /-changes in inventories of finished goods and work in progress},  		 	 
\bibitem[+ income from non-operating activities 19. -non-operating expenses B. Profit (loss) before tax C. Profit (loss) for the year If the bill had been approved, in Italy too, there would no longer have been a contraposition between ordinary and extraordinary items of income Still, revenues and costs would have been distinguished References Références Referencias]{b6}\label{b6} 	 		‘+ income from non-operating activities 19. -non-operating expenses B. Profit (loss) before tax C. Profit (loss) for the year If the bill had been approved, in Italy too, there would no longer have been a contraposition between ordinary and extraordinary items of income’.  	 	 		\textit{Still, revenues and costs would have been distinguished References Références Referencias},  				 	 
\bibitem[+ increases in fixed assets for internal work 5. + other revenues 6. -costs of raw materials, consumables and goods for resale]{b2}\label{b2} 	 		\textit{+ increases in fixed assets for internal work 5. + other revenues 6. -costs of raw materials, consumables and goods for resale},  				 	 
\bibitem[+ interest income, dividends and other financial income 13. -interest expense and financial charges]{b4}\label{b4} 	 		\textit{+ interest income, dividends and other financial income 13. -interest expense and financial charges},  		 	 
\bibitem[+ positive changes in value of financial instruments 16. -negative changes in value of financial instruments]{b5}\label{b5} 	 		\textit{+ positive changes in value of financial instruments 16. -negative changes in value of financial instruments},  		 	 
\bibitem[+/-change in inventories of contract work in progress]{b1}\label{b1} 	 		\textit{+/-change in inventories of contract work in progress},  		 	 
\bibitem[+/-changes in inventories of raw materials, consumables and goods for resale 8. -personnel and other service costs 9. -depreciation and write-downs of non-current assets 10. -write-downs of current receivables and other current assets 11]{b3}\label{b3} 	 		\textit{+/-changes in inventories of raw materials, consumables and goods for resale 8. -personnel and other service costs 9. -depreciation and write-downs of non-current assets 10. -write-downs of current receivables and other current assets 11},  		 	 	 (other costs and expenses A) Operating profit (loss) 
\bibitem[Alexander and Jermakowicz ()]{b10}\label{b10} 	 		\textit{A true and fair view of the principles/rules debate, Abacus},  		 			D Alexander 		,  		 			E Jermakowicz 		.  		2006. 42.  	 
\bibitem[Hopwood ()]{b33}\label{b33} 	 		\textit{Accounting and human behavior},  		 			A G Hopwood 		.  		1976. Prentice Hall.  	 
\bibitem[Hopwood ()]{b39}\label{b39} 	 		‘Accounting and the pursuit of efficiency’.  		 			A G Hopwood 		.  	 	 		\textit{Accounting, Auditing \& Accountability Journal}  		1990. I p. .  	 
\bibitem[Hopwood and Miller ()]{b35}\label{b35} 	 		\textit{Accounting as social and institutional practice},  		 			A G Hopwood 		,  		 			Peter Miller 		.  		1994. Cambridge University Press. 24.  	 
\bibitem[Alexander and Schwencke ()]{b9}\label{b9} 	 		‘Accounting change in Norway’.  		 			D Alexander 		,  		 			H R Schwencke 		.  	 	 		\textit{European Accounting Review}  		2003. 12 p. .  	 
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\end{bibitemlist}
 			 		 	 
\end{document}
