UK Accounting Glossary
The “line” generally refers to gross profit. Above that line on the income statement, typically, are sales and COGS (cost of goods sold) or COS (cost of sales or cost of services). Below the line are operating expenses, interest, and taxes.
Denotes those entries printed above the horizontal line on a company’s profit and loss account that separates profit (and/or loss) from entries showing how said profit is distributed.
Prior to the introduction of Financial Report Standard 3, Reporting Financial Performance, in Oct. 1992, It was understood that any exceptional items that were within the ordinary activities of the business were shown “above the line”, whilst any extraordinary items outside of the ordinary activities of the business were shown below it (below the line).
There was, however, large criticism that the definitions of exceptional and extraordinary items may feasibly be manipulated to improve earning per share figures.
For example; if a property was sold at a large profit, it could have potentially been interpreted as a exceptional item and used to bolster the earnings per share; whereas if a property was sold at a loss; it could be listed as an extraordinary item; and thus listed below the line in such a way that was none detrimental to earning per share figures.
With the introduction of FRS 3, almost all items previously defined as extraordinary items were redefined as exceptional; Under current UK accounting practices, as detailed in the Financial Reporting Standard Applicable in the UK and Republic Of Ireland, all such items are shown above the line and included in the Earnings per share.