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FASB proposes simplifying inventory measurement and eliminating the concept of extraordinary items

  • FASB (US Financial Accounting Standards Board) Image

Jul 17, 2014

As part of its simplification initiative, the FASB has issued two proposed ASUs* intended to reduce the cost and complexity of financial reporting related to inventory measurement and extraordinary items.

One proposal would require entities to use the lower of cost and “net realizable value” instead of the lower of cost or “market” (as currently defined in ASC 330) when measuring inventory. This would eliminate the two conditions for “market” value in ASC 330 that require a reporting entity to consider the “replacement cost of inventory and the net realizable value of inventory, less an approximately normal profit margin.”

The other proposal would eliminate the concept of extraordinary items from U.S. GAAP. The FASB believes that eliminating this concept would save time and reduce costs for preparers as well as alleviate uncertainty in the evaluation of an unusual or infrequent item.

The proposed ASUs are expected to be effective for annual periods (including interim periods) beginning after December 15, 2015.

Comments on the proposals are requested by September 30, 2014.

For more information, see the related Deloitte Accounting Journal entry and the press release, the proposed ASU on inventory measurement, and the proposed ASU on extraordinary items on the FASB’s Web site.


* FASB Proposed Accounting Standards Updates: Inventory (Topic 330): Simplifying the Measurement of Inventory, and Income Statement—Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items.

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