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6.16 Inventory costing
Publication date: 30 Nov 2020
us IFRS & US GAAP guide
As LIFO inventory costing is not permitted under IFRS, companies that utilize the LIFO costing methodology under US GAAP might experience significantly different operating results as well as cash flows.
Furthermore, regardless of the inventory costing model utilized, under IFRS companies might experience greater earnings volatility in relation to recoveries in values previously written down.
US GAAP | IFRS |
A variety of inventory costing methodologies such as LIFO, FIFO, and/or weighted-average cost are permitted. | A number of costing methodologies such as FIFO or weighted-average costing are permitted. The use of LIFO, however, is precluded.
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For companies using LIFO for US income tax purposes, the book/tax conformity rules also require the use of LIFO for book accounting/reporting purposes.
Reversals of write-downs are prohibited.
| Reversals of inventory write-downs (limited to the amount of the original write-down) are required for subsequent recoveries.
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