If IFRS is adopted with no changes made in the current standards and the current tax laws, then companies will have to pull the LIFO reserve back into their taxable income over a four-year period.US GAAPDifferent cost flow assumptions may be used for inventory with a similar nature and use. Physical goods and costs included in inventoryUS GAAPNo guidance is provided on storage costs.IFRSStorage costs are usually expensed.Ĭost flow assumptionsSpecific identification, average cost, FIFO and RIM are allowed.SimilarIFRSUS GAAPĬost flow assumptionsIFRSThe same cost flow assumptions must be used for inventory with a similar nature and use even if inventory is held in different geographic locations and/or by different entities.LIFO method is not allowed:This is significant to some companies because of taxation implications. Physical goods and costs included in inventor圜osts include productions costs, conversion costs and purchase costs.Cost includes freight-in.SimilarSimilarInterest must generally be capitalized.Similar, although certain conditions must be met.IFRSUS GAAP periodic systemsBoth systems are allowed.SimilarIFRSUS GAAP IAS 41, Agriculture, is used to scope out agricultural products and commodities. The proposed effective date is for annual periods beginning after December 15, 2015, with early adoption permitted.ĭefinition and scopeInventory includes finished goods, work-in-progress and raw materials.Inventory is recognized when the risk and rewards pass to entity.SimilarSimilarIFRSUS GAAPĭefinition and scopeUS GAAPIntangible assets produced for resale (e.g., software) are not included in inventory.ASC 908, Agriculture, is used to scope out agricultural products and commodities.IFRSIntangible assets produced for resale are included in inventory. Comments are due September 30, 2014.Inventory would be reported at LCNRV, the same as the IFRS approach. Progress on convergenceOn July 15, 2014, the FASB issued an ED Inventory (Topic 330): Simplifying the Measurement of Inventory. Primary pronouncementsUS GAAPASC 330, InventoryIFRSIAS 2, Inventories
IFRS allows reversals of prior inventory write-downs to be made and recognized in income, unlike US GAAP. US GAAP reports inventory at the lower of cost or market (LCM), where market is defined as a replacement cost with a floor (NRV less normal profit margin) and a ceiling (NRV). periodic systemsPhysical goods and costs included in inventoryEffects of inventory errorsCost flow assumptionsSpecific identificationAverage cost methodsFirst-in, first-out method (FIFO)Last-in, first-out method (LIFO) (including dollar-value LIFO)Retail inventory method (RIM)Lower of cost or marketDisclosuresĮxecutive summaryIFRS does not permit the LIFO method of costing inventory, unlike US GAAP.IFRS reports inventory at the lower of cost or net realizable value (LCNRV). Typical coverage of US GAAPDefinition and scope Perpetual vs.