U.S. GAAP, Codification of Accounting Standards, ASC - Accounting Standards Codification by FASB

U.S. GAAP Codification of Accounting Standards

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IFRS International Standards

Accounting Standards, ASC

U.S. GAAP Codification of Accounting Standards
Codification Topic 330: Inventory

U.S. GAAP Codification, Accounting Standards ASC,

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U.S. GAAP by Topic, Accounting by Topic

Codification Topic 330
Inventory

Inventory
Tangible personal property of the following:
1. held for sale --> merchandise, finished goods
2. in the course of production --> work in process
3. to be consumed in the production --> raw materials

Initial measurement
Inventories are measured at cost when first recognized

Cost flow assumptions
One of the following assumptions is made to determine the cost of inventory:
1. First-in First-out (FIFO): Items that came in first are sold first
2. Last-in First-out (LIFO): Items that came in last are sold first
3. Average method: Weighted average cost is applied as unit cost

Retail inventory method is
--> allowed in some situations

Subsequent measurement
If the market is lower than the cost
--> inventory is measured at the market
--> "Lower of Cost or Market" (LCM)

Market
1. The market refers to current replacement cost
2. If net realizable value (NRV) is lower that current replacement cost
--> NRV is the market
3. If current replacement cost is lower than (1)
--> (1) is the market
(1) net realizable value - normal profit margin

Lower of Cost or Market (LCM) summary
(a) current replacement cost
(b) net realizable value
(c) net realizable value - normal profit margin

If (c) < (a) < (b) --> market = (a)
If (c) < (b) < (a) --> market = (b)
If (a) < (c) < (b) --> market = (c)

International Financial Reporting Standards (IFRS)

IAS 2: Inventories