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FASB Reaches Decisions on Inventory Disclosures

During a September 19 discussion on inventory disclosures as part of its Disclosure Framework project, the Financial Accounting Standards Board (“FASB”) agreed that companies must disclose the following in annual financial statements:

  • Inventory separated by component
  • Inventory separated by measurement basis
  • Inventory balance changes that are not particularly associated with the purchase, manufacture, or sale of inventory in the regular course of business
  • A qualitative explanation of the costs capitalized into inventory
  • The impact of last-in, first-out (“LIFO”) liquidations on income
  • The replacement cost for LIFO inventory
  • Inventory, by reportable segment or component for each reportable segment, if the information is normally presented to the chief operating decision maker (public companies only)

In addition, the FASB reached decisions on changes to the guidance under Topic 330, Inventory, and the transition method for the proposed changes to the disclosure requirements. For its next steps, the FASB ordered staff members to draft a proposed Accounting Standards Update. The FASB also plans to host a roundtable to discuss topics related to the Disclosure Framework project.

A full recap of the September 19 meeting is available on the FASB website.

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