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Julia Makarieva Jennifer Waclawik Becky Fay Grayson Schrantz Alex Perez

Inventories- US Generally Accepted Accounting Principles (GAAP) vs. International Financial Reporting Standards (IFRS). Julia Makarieva Jennifer Waclawik Becky Fay Grayson Schrantz Alex Perez. Definition of Inventory. Applies to:. Costs Included in Inventory.

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Julia Makarieva Jennifer Waclawik Becky Fay Grayson Schrantz Alex Perez

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  1. Inventories- US Generally Accepted Accounting Principles (GAAP) vs. International Financial Reporting Standards (IFRS) Julia Makarieva Jennifer Waclawik Becky Fay Grayson Schrantz Alex Perez

  2. Definition of Inventory

  3. Applies to:

  4. Costs Included in Inventory

  5. Costing Methods (Cost Flow Assumptions)

  6. Measurement of Inventories

  7. Required Disclosures:

  8. Advantages and Disadvantages

  9. Potential Problems with Adopting IFRS • Problems Consist of the death of LIFO (Last In First Out) for the companies that used it for their inventory. • LIFO is widely used in the U.S, so that would cause a change for majority of companies here. • Affects their financial reporting. • Affects their taxation (required to change their taxing methods).

  10. Potential Problems with Adopting IFRS • Purpose of LIFO is to lower their income tax liability and to postpone paying taxes. • This would also reduce income for financial reporting purposes. • Using LIFO would cause a reduction in the taxable income. • Due to IFRS not allowing LIFO it would cause a switch to FIFO or Average Cost which would: • Increase inventory • Increase the current income taxes

  11. Audit Problems with IFRS • Where is the line drawn? • Consistency of Measurement • Reversal transactions • Allows multiple methods if identical • Consistency is key!! • Net realizable value

  12. Audit Problems with GAAP • Obsolete inventory • Potential solution • Bill and Hold scam • Good auditing • Potential solution

  13. Which is Better? The IFRS inventory valuation is a fairer valuation because it is not solely based on rules, but principles as well. It also provides increased comparability.

  14. Sources • http://ifrsusa.wordpress.com/2011/04/05/which-is-better-%E2%80%93-principles-or-rules/ • http://ec.europa.eu/internal_market/accounting/docs/consolidated/ias2_en.pdf • www.csb.uncw.edu/people/rocknessj/classes/.../InventoryIFRS.ppt‎ • http://www.ey.com/Publication/vwLUAssets/US_GAAP_versus_IFRS:_The_basics_November_2012/$FILE/US_GAAP_v_IFRS_The_Basics_Nov2012.pdf • http://cpaclass.com/gaap-accounting-standards/codification-300/asc-codification-topic-330.htm • https://checkpoint.riag.com/app/view/previewDocNew?feature=tcheckpoint&lastCpReqId=4700635&preview=y&linkid=162&linkType=tlltype&DocID=iGAAPCD13%3A4822.1&pinpnt=cite&linkHght=destguid%3AiGAAPCD13%3A4882.1&SrcDocId=T0GAAPCD13%3A4882.1-1 • http://www.journalofaccountancy.com/Issues/1999/Oct/carmichl.htm • http://www.accountingtools.com/obsolete-inventory-accounting • http://www.thefreelibrary.com/Inventory+valuation+under+IFRS+and+GAAP%3A+this+article+is+based+on+a...-a0284451759

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