G describe the financial statement presentation of and disclosures relating to inventories;

Question 1

Inventory Disclosures (FootnoteS)

Answer 1

To evaluate a firm’s inventory management, and to make adjustments when facilitating comparisons with other firms in the industry

Question 2

Required Inventory Disclosures

Answer 2

Disclose the Cost Flow Method

Disclose and classify (raw materials, work-in-process, finished goods) total carrying value of inventory.

Disclose CV’s of INV’s reported at FAIR VALUE LESS SELLING COSTS

Disclose the cost of Inv. recognized as an expense (COGS) during the period (**COGS…cost of inventory…recognized as an expense)

Disclose the amount of inventory write-downs

Disclose reversals and the circumstances which led to reversal

Disclose CV of Inv. pledged as collateral

Question 3

Inventory Changes

Answer 3

Retrospective: Prior FS’s are recast based on the new cost flow method, which leads to a cumulative effect which is reported as an adjustment to the Beg. RE of the earliest year presented

IFRS Inventory Changes: Firm must prove that the change will provide reliable and more relevant information. GAAP Inv. Change: Firm must explain why the change in cost flow method is preferable.

A LIFO CHANGE is PROSPECTIVE (not retrospective…therefore no adjustments to prior periods are made) Prospective application means: the CV of Inv under the old method become the first layer of Inv. under LIFO…IN THE PERIOD CHANGE