Inventory: IFRS vs. U.S. GAAP

There are several differences between International Financial Reporting Standards (IFRS) and U.S. GAAP when it comes to accounting for inventory.

First, U.S. GAAP allows companies to use the LIFO cost flow assumption whereas IFRS does not allow LIFO.

Second, IFRS requires all companies to report inventory on the Balance Sheet at the lower of cost or net realizable value. U.S. GAAP also uses the lower-of-cost-or-net-realizable-value rule, but has an exception for companies that use LIFO or the retail inventory method (they report inventory at the lower of cost or market).

Third, IFRS requires companies to reverse an inventory writedown at a later date if the value of the inventory recovers. U.S. GAAP, however, does not allow companies to record reversal for recoveries. With U.S. GAAP, companies can write inventory down, but they cannot write the value back up if the inventory's value increases.
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