1.4 Inventories

The definitions of “inventory” under IFRS Accounting Standards and U.S. GAAP are essentially the same. The primary differences between the two frameworks regarding the accounting for inventories relate to costing methods and impairment reversals, as summarized in the table below.

Topic	IFRS Accounting Standards (IAS 2)	U.S. GAAP (ASC 330)
Costing methods (cost formulas)	First-in, first-out (FIFO) and weighted-average cost are acceptable accounting methods for determining cost of inventory. Last-in, first-out (LIFO) is not permitted. The specific identification method is required for inventory items that are not ordinarily interchangeable and for goods or services produced and segregated for specific projects.	FIFO, LIFO, weighted-average cost, and specific identification are acceptable accounting methods for determining cost of inventory.
Consistency of costing methods (cost formulas)	The same costing method must be applied to all inventories that have a similar nature and use to the entity.	There are no similar requirements under U.S. GAAP.
Reversal of impairment losses	An entity must reverse impairment losses and corresponding increases in inventory up to the original carrying value.	An entity is prohibited from reversing impairment losses.