Inventory Accounting Essay

1. Inventory beThe use of LIFO for determining inventory costs under International Accounting Standards is taboo, while it is permitted under US GAAP.2. Reversal of inventory write downs down the stairs IAS, it is required if certain criteria are met whereas US GAAP strictly prohibits it.3. Basis of Inventory valuationnether IAS, the inventory is carried at the begin of cost or net realizable value (NRV). beneath US GAAP, Carried at the trim of cost and market (market is the lower of replacement cost and NRV minus normal good margin).4. Whether the costs of idle capacity and spoilage can be included in inventory chthonian IAS, it is prohibited.Under US GAAP, it is permitted.The change to IAS will keep down the biggest disadvantage of US GAAP that is it permits LIFO to be used for inventory valuation where the oldest inventory costs are assigned to the inventory account which, when prices are changing can result in an inventory value that does not reflect the true true value.A lso, in case of shift to IAS, US companies will not be able to show lower profits by using LIFO when prices are rising. US GAAP helped the companies to reduce their payment of taxes.Under US GAAP, extraordinary items are permitted but restricted to infrequent, unusual and rare items that affect profit and loss. However, it is prohibited under IAS.Thus, extraordinary items give companies somewhat of a hall pass with the markets, allowing them to sometimes report lower earnings but get credit for higher earnings. Obviously, it is tempting for companies to try to report every elusive thing that happens as an extraordinary item. This can be avoided once IAS is in place.IAS is more comprehensive and clear. It would avoid misinterpretation by the companies.