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GAAP vs. IFRS: Inventory definitions Flashcards

GAAP vs. IFRS: Inventory definitions
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  • GAAP
    U.S. accounting framework established by FASB, emphasizing rules-based guidance for financial reporting, including inventory valuation.
  • IFRS
    International accounting standards set by IASB, focusing on principles-based guidance and fair value reflection in inventory reporting.
  • Inventory
    Goods held for sale or use in production, valued initially at historical cost and subject to subsequent valuation adjustments.
  • Historical Cost
    Original purchase price paid for inventory, serving as the basis for initial recognition under both GAAP and IFRS.
  • Lower of Cost or Market
    Valuation method requiring inventory to be reported at the lesser of its original cost or current market value.
  • Replacement Cost
    Current expense to acquire identical inventory, used by GAAP as the market value in the lower of cost or market rule.
  • Net Realizable Value
    Estimated selling price of inventory minus any costs necessary to complete and sell it, used by IFRS for valuation.
  • LIFO
    Inventory costing method assigning most recent costs to cost of goods sold; prohibited under IFRS but allowed by GAAP.
  • Fair Value
    Current market-based measurement reflecting the price to sell an asset, emphasized by IFRS in inventory reporting.
  • FASB
    U.S. organization responsible for establishing and maintaining GAAP standards for financial accounting.
  • IASB
    International body that develops and issues IFRS, guiding global accounting practices including inventory.
  • Cost of Goods Sold
    Expense representing the cost assigned to inventory items sold during a period, affected by chosen inventory method.
  • Ownership of Goods
    Legal right to inventory, determined by shipping terms and consistent under both GAAP and IFRS.
  • FOB Destination
    Shipping term indicating ownership transfers to the buyer when goods reach their destination.
  • FOB Shipping Point
    Shipping term indicating ownership transfers to the buyer once goods leave the seller’s premises.