LOS I requires us to:
i. describe the financial statement presentation of and disclosures relating to inventories.
1. Disclosures with regards to valuation
The U.S. GAAP requires the disclosure and presentation of the following in the financial statements and the notes to the financial statement:
a. accounting policies used,
b. cost formula used,
c. the total carrying value of each type of inventory (i.e. raw material, finished goods, work in progress, etc.),
d. the value of inventories carried at the fair value as reduced by the selling cost,
e. COGS for the period,
f. amount of write-downs if any, and
g. carrying amount of inventory pledged as collateral for liabilities.
Under GAAP, any material income from LIFO liquidation is also required to be reported, apart from the above.
Under IFRS all the above disclosures are required to be made (except for the gains from LIFO liquidation). Additionally, the following two disclosures are also required to be made:
a. the amount of any reversals to the write-down of inventory during the reporting period, and
b. description, as to why the given reversals were made (i.e. the basis for reversals).
2. Disclosures with regards to changes in valuation methods
Under IFRS,
a. the change in the method of valuation is permitted if it enhances the reliability and relevance of financial data, and
b. the change is accounted for retrospectively, at least for the years presented in the financial statements (this is mainly to maintain the comparability in the financial statement’s data).
Under U.S. GAAP:
a. If there is a change in method from LIFO to any other, then a retrospective restatement of inventory and retained earnings for all the years presented in the income statement is required.
b. If however, there is a change from any other method towards LIFO, the prospective restatement is also permitted.