ACC5160&7130-Ch3-IFRSvsUSGAAP - having a similar nature...

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Managerial Accounting Fall 2010 Comparison of US GAAP and IFRS Under both, cost includes all direct expenditure to get inventory ready for sale and includes attributable overheads (ie: production costs, conversion costs, purchase costs, freight-in) – similar definition of what to include in product cost Differences include: How inventories are measured on the balance sheet o IAS: lower of cost and net realizable value (NRV = estimated selling price less estimated costs of completion and sale) o US GAAP: lower of cost or market where market is defined as replacement cost with a floor (NRV less normal profit margin) and ceiling (NRV) Cost flow assumption o IAS: specific identification, FIFO or average cost o US GAAP: also permits LIFO Cost flow assumption used o IAS: same cost flow assumption is applied to all inventories having a similar nature and use to the entity o US GAAP: same cost flow assumption need not be applied to all inventories
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Unformatted text preview: having a similar nature and use to the entity • Inventory write-downs and recoveries in value o IFRS: inventory write-downs can be reversed for subsequent recoveries in value and are recognized in income o US GAAP: inventory write-downs are not reversed • Expensing write-downs o IFRS: expense account is not specified and a valuation allowance is used because future reversals are permitted Debit expense account and credit valuation allowance when recognize write-down Debit valuation allowance and credit expense account when reverse write-down) o US GAAP: write-down should be included in cost of goods sold (COGS) except when the amount is “substantial and unusual”, in which case it is reported as a loss on the income statement • Intangible assets produced for resale o IFRS: included in inventory o US GAAP: not included in inventory • Holding costs o IFRS: usually expensed o US GAAP: no guidance...
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This note was uploaded on 10/03/2010 for the course ACCOUNTING Finance 23 taught by Professor Bob during the Spring '10 term at Wayne State University.

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