Inventory accounting:
Below are excerpts from the 2009 annual report of Daimler AG, a German company that manufactures luxury automobiles.
Inventories:
Inventories are measured at the lower of cost and net realizable value. The net realizable value is the estimated selling price less any remaining costs to sell. The cost of inventories is based on the average cost principle and includes expenditures incurred in acquiring the inventories and bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost also includes production overheads based on normal capacity.
Inventories
At December 31, (In millions of €) 2009 2008______ Raw materials and manufacturing supplies 1,517 1,725 Work-in-process 1,626 1,880 Finished good, parts and products held for resale 9,666 13,066 Advance payments to suppliers 36 134 T 12,845 16,805
The amount of write-down of inventories to net realizable value recognized as expense in cost of sales was €299 million in 2009 (2008: €245 million; 2007: €111 million). The reversals of write-down on inventories were €7 million in 2009 (2008: €5 million; 2007: €12 million). At December 31, 2009, €1,482 million (2008: €1,894 million) of the total inventories were carried at net realizable value. Inventories that are expected to be turned over after more than 12 months amounted to €634 million at December 31, 2009 (2008: €583 million), and are primarily spare parts. Based on the requirement to provide collateral for certain vested employee benefits in Germany, the value of company cars included in inventories at Daimler AG in an amount of €457 million (2009: €464 million) was pledged as collateral to the Daimler Pension trust e.V. The carrying amount of inventories recognized during the period by taking possession of collateral held as security amounted to €136 million in 2009 (2008: €102 million). The utilization of these assets occurs in the context of normal business cycle.
a. Using the Daimler note, identify the similarities and differences between U.S. GAAP and IFRS regarding inventory accounting.