What is the accounting standard for inventories?

What is the accounting standard for inventories?

The objective of IAS 2 is to prescribe the accounting treatment for inventories. It provides guidance for determining the cost of inventories and for subsequently recognising an expense, including any write-down to net realisable value.

Which inventory method is required under GAAP?

Under GAAP, FIFO (first in first out), LIFO (last in first out), weighted average, and specific identification are all acceptable methods of cost determination for your company’s inventory.

What are the US GAAP standards?

Generally accepted accounting principles (GAAP) refer to a common set of accounting principles, standards, and procedures issued by the Financial Accounting Standards Board (FASB). Public companies in the U.S. must follow GAAP when their accountants compile their financial statements.

Is GAAP standard cost inventory?

The standard costs are used to track inventory and establish a benchmark to use in making management decisions. The actual costs are used to track actual spending, and periodically adjust the value of inventory from standard cost (which is not GAAP-compliant) to actual cost (which is GAAP-compliant).

What does GAAP say about inventory?

Under US GAAP, inventories are measured at the lower of cost, market value, or net realisable value depending upon the inventory method used. Market value is defined as current replacement cost subject to an upper limit of net realizable value and a lower limit of net realizable value less a normal profit margin.

What is the difference between GAAP and IFRS over inventory?

GAAP permits the use of all three of the most common methods for inventory accountability; the IFRS forbids the use of the LIFO method. IFRS requires that inventory is carried at the lower of cost or net realizable value; U.S. GAAP requires that inventory is carried at the lower of cost or market value.