Inventory acquired in a business combination must be measured at its acquisition-date fair value — that is, the price at which market participants would be willing to sell or buy the inventory. Neither ASC 805 nor ASC 820 provides detailed guidance on measuring the fair value of inventory, but carryover of the book basis of the acquiree’s inventories is not permitted. Because there are many acceptable methods for accounting for inventory, an acquirer and acquiree often have different policies for doing so. The method used to account for inventory (e.g., FIFO, LIFO, or average cost) does not affect its fair value measurement. See Section 4.16 for more information about conforming accounting policies.
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