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FASB Unveils Plan to Simplify Inventory, Extraordinary Items

Tammy Whitehouse | July 21, 2014

In its quest to simplify accounting standards, the Financial Accounting Standards Board has issued two new proposals -- one to make it easier to measure inventory and another to eliminate requirements around extraordinary items.

To make inventory measurement simpler, FASB proposes to eliminate some of the measurement methods that currently exists in U.S. GAAP. Currently, companies are required to measure inventory at the lower of cost or market value. Market value could be set according to the net realizable value of the inventory, the replacement cost, or the net realizable value minus a normal profit margin. FASB says the proposed guidance would require inventory to be measured at the lower of cost or net realizable value, eliminating the requirements to consider the replacement cost or the approximate normal profit margins.

FASB says...

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