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Chapter 9: Q1IFRS (page 499)

Briefly describe some of the similarities and differences between GAAP and IFRS with respect to the accounting for inventories

Short Answer

Expert verified

The similarities mentioned in step 1 and differences are mentioned in step 2.

Step by step solution

01

Similarities between IFRS and GAAP

  • Under both approaches, inventories purchased are considered at purchase costs, and subsequent inventories purchased are evaluated at NRV.
  • Treatment of ownership of goods in transit, special sales agreements, and consignment goods are the same.
02

Differences between IFRS and GAAP

  • IFRS is principle-based, and GAAP is detailed guidelines for the accounting and reporting of inventories.
  • LIFO inventory valuation can be used in GAAP. However, it cannot be used in IFRS.
  • There is no exception to the LCNRV rule under IFRS.
  • Under GAAP, inventories reported at LCNRV cannot be reversed to the original cost. However, in the case of IFRS, it can be reversed.
  • Under IFRS, both biological assets are recorded at the net realizable value at the time of harvesting, whereas the same is not followed in the case of GAAP.

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Most popular questions from this chapter

Floyd Corporation has the following four items in its ending inventory. Item Cost Net Realizable Value (NRV) Jokers \(2,000 \)2,100 Penguins 5,000 4,950 Riddlers 4,400 4,625 Scarecrows 3,200 3,830 Determine the following: (a) the LCNRV for each item, and (b) the amount of write-down, if any, using (1) an item-by-item LCNRV evaluation and (2) a total category LCNRV evaluation

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Presented below is information related to Waveland Inc. Cost Retail Inventory, 12/31/17 \(250,000 \) 390,000 Purchases 914,500 1,460,000 Purchase returns 60,000 80,000 Purchase discounts 18,000 — Gross sales revenue (after employee discounts) — 1,410,000 Sales returns — 97,500 Markups — 120,000 Markup cancellations — 40,000 Markdowns — 45,000 Markdown cancellations — 20,000 Freight-in 42,000 — Employee discounts granted — 8,000 Loss from breakage (normal) — 4,500 486 Chapter 9 Inventories: Additional Valuation Issues Instructions Assuming that Waveland Inc. uses the conventional retail inventory method, compute the cost of its ending inventory at December 31, 2018.

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