Legal Definitions - extraordinary gain

An extraordinary gain refers to a profit or financial benefit that a company or individual receives from an event or transaction that is both unusual in nature and infrequent in occurrence. It is something that does not happen regularly as part of normal business operations and is unlikely to recur in the foreseeable future. Because of their unique nature, extraordinary gains are often reported separately on financial statements to give a clearer picture of a company's ongoing performance.

• Example 1: Unexpected Legal Settlement

  A small technology startup, after several years of complex litigation, wins a major lawsuit against a much larger competitor for copyright infringement. The court awards the startup a substantial sum in damages, which significantly exceeds its typical annual revenue.

  This legal settlement represents an extraordinary gain. Engaging in and winning a multi-year, high-stakes copyright infringement lawsuit is not a regular occurrence for a technology startup, nor is it part of its typical revenue-generating activities. The large financial award is an infrequent and unusual event that significantly boosts the firm's financial position for that particular period, distinct from its core business of developing and selling software.

• Example 2: Insurance Payout from a Rare Natural Disaster

  A regional brewery's main production facility is severely damaged by a freak earthquake, an event highly unusual for its geographical location. The brewery receives a large insurance payout that significantly exceeds the book value of the destroyed assets and the costs of cleanup and rebuilding, resulting in a net profit.

  This payout is an extraordinary gain because the earthquake was an infrequent and unusual event, not part of the company's regular business risks or operations. The substantial net profit from the insurance settlement is a one-time financial boost that does not reflect the brewery's core profitability from producing and selling beer.

• Example 3: Government Expropriation of Property at a Premium

  A family-owned manufacturing business owns a piece of undeveloped land adjacent to its factory that it intended to hold for future expansion. Unexpectedly, the local government decides to acquire this specific parcel through eminent domain for a new public infrastructure project, paying the business a price significantly above the land's market value and the company's original purchase price.

  The profit realized from the government's acquisition is an extraordinary gain. The forced sale of a specific property through eminent domain, especially at a premium price, is an unusual and infrequent event for a manufacturing business, distinct from its normal operational activities or typical asset sales. It is not a transaction that the company could have predicted or planned for as part of its regular business model.