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Inventories Accounting under US-GAAP and IFRS Standards: The Differences That Hinder the Full Convergence

Author

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  • Manuela Lucchese
  • Ferdinando Di Carlo

Abstract

This study purposes of understanding the existing differences between US-GAAP and IFRS accounting treatments of inventory. Given the 2015 FASB update, aimed at simplifying and aligning inventory accounting with IFRS standards, the research explores the introduced innovations. More specifically, the study, starting from a literature review and standards analysis, designs a theoretical framework aimed at facilitating the understanding of the differences still existing between the two accounting principles. Different from the prior works, we focus on the complex determination of the net realizable value in the case of input (e.g., raw materials) write-down. In particular, we show how the net realizable value (NRV) changes according to the value taken as a reference. The results of this analysis suggest that, based on a prudential valuation logic, the replacement cost is the best estimate for NRV.

Suggested Citation

  • Manuela Lucchese & Ferdinando Di Carlo, 2021. "Inventories Accounting under US-GAAP and IFRS Standards: The Differences That Hinder the Full Convergence," International Journal of Business and Management, Canadian Center of Science and Education, vol. 15(7), pages 180-180, July.
    • Handle: RePEc:ibn:ijbmjn:v:15:y:2021:i:7:p:180
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    References listed on IDEAS

    as
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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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