U.S. GAAP for Inventory
The Financial Accounting Standards Board (FASB) issued the FASB Accounting Standards Codification on July 1, 2009. This Codification is the "single source of authoritative nongovernmental U.S. Generally Accepted Accounting Principles (GAAP)" and is effective for interim and annual periods ending after September 15, 2009. The Codification includes standards in levels A through D of the then-current U.S. GAAP hierarchy. These standards include those issued by the FASB, American Institute of Certified Public Accountants (AICPA), and Emerging Issues Task Force (EITF), as well as other related literature. The Codification does not change GAAP but simply introduces a new, more easily accessible and user-friendly structure. As Wayne State University students, you have academic access to the FASB Codification database through the American Accounting Association.
The user ID and password are case-sensitive. Access using the user ID and password is limited to Wayne State University students currently enrolled in an accounting class. This information is not to be disseminated to other students. On the home page, you will find tutorials and other tools to help you navigate the Codification.
Using the FASB Codification database:
1. Identify the appropriate topic that addresses inventory.
2. Locate the section addressing initial measurement and print out the appropriate pages. Above the topic heading you will find a link to a number of print functions including printer-friendly, printer-friendly with TOC, and printer-friendly with sources. You will find it helpful to compare these views so that you can identify which is most appropriate for your research purposes. Read through the appropriate section and summarize GAAP for the following issues: (a) acceptable cost flow assumptions for determining inventory cost (b) how overhead is to be allocated to individual units of production, (c) the effect of abnormal levels of production on the allocation of overhead, and (e) how unallocated overhead is to be treated.
3. Locate the section addressing subsequent measurement. Read through the appropriate section and summarize GAAP for the following issues: (a) how inventory is measured in periods after its initial acquisition (merchandiser) or production (Manufacturer), (b) how the superseding guidance included in accounting Standard Update (ASU) No.2015-11 differs from the current approach, and (c) when the guidance becomes effective (be sure to indicate what "P" and 'N"stands for regarding the transition dates).
4. Why did the FASB issue ASU No.2015-11? In answering this question, you may find it helpful to look at the document itself on the FASB's website.
5. Why did the FASB exclude LIFO and the retail inventory method from the revised measurement requirement outlined in ASU No.2015-11
Prepare Word document addressing issues identified in item 2-5.
Note: the proper format for an in-text citation of the codification is ASC XXX-YY-ZZ-PP, where XXX=topic, YY=subtopic, ZZ=section, and PP=paragraph