Question

Briefly describe some of the similarities and differences between GAAP and IFRS with respect to the accounting for inventories

Short answer

The similarities mentioned in step 1 and differences are mentioned in step 2.

Step-by-step solution

Similarities between IFRS and GAAP

• Under both approaches, inventories purchased are considered at purchase costs, and subsequent inventories purchased are evaluated at NRV.
• Treatment of ownership of goods in transit, special sales agreements, and consignment goods are the same.

Differences between IFRS and GAAP

• IFRS is principle-based, and GAAP is detailed guidelines for the accounting and reporting of inventories.
• LIFO inventory valuation can be used in GAAP. However, it cannot be used in IFRS.
• There is no exception to the LCNRV rule under IFRS.
• Under GAAP, inventories reported at LCNRV cannot be reversed to the original cost. However, in the case of IFRS, it can be reversed.
• Under IFRS, both biological assets are recorded at the net realizable value at the time of harvesting, whereas the same is not followed in the case of GAAP.