Scene 1 Both IFRS and U. S. GAAP require that firms report inventory at the lower of

Question:

Scene 1 Both IFRS and U. S. require that firms report inventory at the lower of cost or market (where market is defined as the net realizable value by IFRS, and generally the current replacement cost by U. S. ). What is the basic principle/ characteristic behind this standard that results in this “lower” reporting approach (asset write- down)?
Scene 2 Read the objectives for IFRS (IASC, International Accounting Standard 2, paragraph 1) and U. S. (FASB ASC 330- 10- 10- 1). Based upon what is stated in these objectives, which set of standards is more concerned with the presentation of inventories?
Scene 3 Do you think that the reversal of a write- down of inventory does a better job of accurately reflecting the information related to inventory on the or on the income statement? Is the fact that U. S. disallows the reversal and IFRS allows the reversal consistent with the objectives?
Scene 4 Currently, IFRS is more likely than U. S. to report assets at fair value ( e. g., property, plant, and equipment can be revalued under IFRS, but not U. S. .) Is the IFRS requirement that prior inventory write- downs be reversed a different way of saying that inventory should be reported at market value under IFRS?
Scene 5 While neither IASC, International Accounting Standard 2 nor FASB ASC 330 provides the reasoning for why the reversal of inventory write- downs is allowed or not allowed, the issues surrounding the reversal of write-downs for long- lived assets should be quite similar. Read the basis of conclusions under U. S. ( FASB, Statement of Financial Accounting Standards No. 144, paragraph B53) and under IFRS ( IASC, International Accounting Standard 36, paragraphs BCZ 182 through BCZ 186) that provide a discussion of the reasons the Boards made the decisions that they did. What are the reasons that one might oppose reversals? What are the reasons that one might support reversals?
Scene 6 Do you believe that companies should be allowed/ required to reverse prior inventory write- downs if the market value of the inventory increases in periods subsequent to the initial write- down?
GAAP
Generally Accepted Accounting Principles (GAAP) is the accounting standard adopted by the U.S. Securities and Exchange Commission (SEC). While the SEC previously stated that it intends to move from U.S. GAAP to the International Financial Reporting Standards (IFRS), the... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...