Example of Reporting a Write-down in Inventory. From within the action menu, select the "Copy to iBooks" option. Under US GAAP, which of the following is least likely a relevant disclosure relating to inventories? Set preferences for tailored content suggestions across the site, COVID-19 - Accounting and reporting resource center. Information related to inventory write-downs. Under US GAAP, the circumstances which led to the reversal of a write-down of inventories are not a relevant requirement because US GAAP does not permit the reversal of prior-year inventory write-downs. The correct answer is B. US GAAP does not require the disclosure of write-down reversals because US GAAP does not allow for the reversal of write-downs. > It seems logical that if the market value of inventory has increased, you should state it at current value than its value as of the last financial statement. Inventory, includes the basic principles in accounting for inventory and specific examples illustrating topics such as inventory costing, the retail inventory method, and LIFO inventories. ���998�O�3�����ŝ`ffB�9ؐ� ��V�����AEO��]���`�)QIb�����B>��w�)|5=��3�����JˡRg�H!x��7_�Y�=�����J"y�h�N=m�4M>;4�-\��5&����a�|`f3P�4�����=��j���yk���,����Ju G}s)y�Ɲ-ġ����]/��f�\�5��_5ݳ�)|oͿc�G����/ ����q�\�O5x��;�9h$��T����j����I{��ƀMv���پ�2�\5vW���n�k6��h��AK�Wh3�M� �_���qU�&����CjbU�m��h��T�:�� 䲵=5�S��7��%EV�����%^�v��! The inventory may lose its value due to damage, deterioration, loss from theft, damage in transit, changes in market demands, misplacement etc. © 2016 - 2020 PwC. The ASU does not change any other aspects of the accounting for inventory. C. Information related to the carrying amount of each inventory section. Information related to inventory write-downs. %PDF-1.6 %���� 208 0 obj <>stream Information related to inventory write-down reversals. In addition, US GAAP requires disclosure of significant estimates applicable to inventories and of any material amount of income which results from the liquidation of LIFO inventory. {��z�`P�g�$EZ��W� In fact, GAAP effectively states that marking down individual line items is a requirement except in specified limited circumstances (ASC 330-10-35-9–11). Subscribe to PwC's accounting weekly news, US Strategic Thought Leader, National Professional Services Group, PwC US. Annual reports typically present financial statements that have been audited by an independent... 3,000 CFA® Exam Practice Questions offered by AnalystPrep – QBank, Mock Exams, Study Notes, and Video Lessons, 3,000 FRM Practice Questions – QBank, Mock Exams, and Study Notes. CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute. Please see www.pwc.com/structure for further details. The ASU only addresses the measurement of inventory if its value declines or is impaired. One major difference between GAAP vs. IFRS is the inventory write-down reversal treatment. &SnF��:�$b����N������ ��!�AjN������}2�=kv>&�|����b߇������g��&����~_/���!�w �H�t���3�gO�X�bʼne�rC��S�!y����5#� }��[�8p|���m(���M�k����;�#[� �3R`OK%��RVs�.�K���Tq4d�q�� � ���J�s���yk�_w��wCA']d�ߢ���#N���Qz��c����ۜfe*�@��I��۪o��������:�j$�ETF��k�@���!�'U�;�$Қ��^u��끨���`��pgr�Yq��֫�]/��q��Us ������e��s�{`�fD���r�W�h�1_o&^��1dD֙���R�Zt��e":a International financial reporting standards require you to disclose any inventory write-offs on the income statement. The Inventory guide addresses the accounting for inventory under US GAAP. The Inventory guide addresses the accounting for inventory under US GAAP. Start adding content to your list by clicking on the star icon included in each card, Accounting guide describe the financial statement presentation of and disclosures relating to inventories, Financial Reporting and Analysis – Learning Sessions, March 1, 2019 in Financial Reporting and Analysis. The carrying amount of inventories that are pledged as security for liabilities. Under IFRS, the following financial statement disclosures in relation to inventories are required: The inventory-related disclosures under US GAAP are quite similar to those under IFRS, except that requirements 6 and 7 are irrelevant due to the fact that US GAAP prohibits the reversal of prior-year inventory write-downs. Inventory Reversal. ©AnalystPrep. The debit in the entry to write down inventory is recorded in an account such as Loss on Write-Down of Inventory, which is an income statement account. Under GAAP, if the market value of an asset increases, the company can’t reverse the amount of write-down. Solution. US GAAP does not require the disclosure of write-down reversals because US GAAP does not allow for the reversal of write-downs. These are the significant differences between U.S. GAAP and IFRS with respect to accounting for inventory. GAAP standards are less demanding but do require you to disclose losses due to LCM on the income statement. Assuming no receipt of payment for the inventory, you will debit a cost of goods sold account and credit either inventory directly or your inventory reserve account. B. Under GAAP, however, the calculation takes into account averages of the individual interim period. Options A and C give relevant disclosure requirements. Not surprisingly, the disclosure and presentation requirements are very similar under IFRS and US GAAP. The circumstances which led to the reversal of a write-down of inventories, C. The accounting policies adopted in measuring inventories.

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