FASB to Tweak Accounting for Inventories and Income Statements
June 18, 2014 Leave a comment
June 11, 2014, 12:41 PM ET
FASB to Tweak Accounting for Inventories and Income Statements
U.S. accounting rule makers decided this week to start two, short-term projects aimed simplifying Generally Accepted Accounting Principles.
The projects will streamline inventory measurement techniques and to reduce extraordinary items in corporate income statements, the Financial Accounting Standards Board said.
“We believe we could reduce cost and complexity,” FASB Chairman Russell Golden said in a statement.
The move is part of a broader initiative by the board, which is researching several additional suggestions by stakeholders.
Under current U.S. accounting rules, companies have to consider replacement cost, profit margin and the realizable value of their inventory to measure it. FASB tentatively decided companies should instead choose the lower of either their inventory cost or its net realizable value. Net realizable value is the estimated sales price of a company’s inventory, minus selling costs.
The income statement project would remove the concept of “extraordinary items” from GAAP. Currently, companies are required to separately evaluate and disclose those items.
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