DipIFRS ACCA course - IASB Conceptual Framework No.2

DipIFRS ACCA course - IASB Conceptual Framework No.2

For inventory:

Both US GAAP and IFRS allow for:
1. First in first out (FIFO).
2. The weighted average cost (WA).
3. Specific identification methods for stock valuation.

However US GAAP also permits the Last In First Out (LIFO) method. It is not permitted under International Accounting Standards (IFRS). Using the last in first out method may artificially decrease net income and may not reflect the actual flow of inventory items through the company.

For fixed assets:

US GAAP requires long-life assets such as:
1. Buildings.
2. Furniture.
3. And equipment.

At (historic cost) and appropriately (depreciated appropriately). Under International Financial Reporting Standards (IFRS) these assets are initially valued at cost but can be revalued later (revalued) up or down to market value. Any separate components of the asset that have different useful lives must be depreciated separately in accordance with IFRS.
Whereas American standards allow the consumption of ingredients ... but they are not required / not obligatory.

International Financial Reporting Standards (IFRS) are developed by the International Accounting Standards Board (IASB).

US GAAP developed by the Financial Accounting Standards Board (FASB).

In the absence of a standard or an interpretation that applies specifically to a transaction, management must use its judgment in developing and implementing an accounting policy that results in relevant and reliable information.
In making this judgment, IAS 8 requires management to consider:
1. Definitions.
2. The recognition criteria.
3. The measurement concepts of:
1. assets.
2. Liabilities.
3. Income.
4. Expenses.
In the framework.

This elevation in the importance of the framework was added in the 2003 revisions to IAS 8.
The framework is not a standard and does not override any specific international standards for financial reporting


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