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Standard On Inventory Costs Issued; More From IASB, EU

Tammy Whitehouse | November 30, 2004

Before breaking for the Thanksgiving holiday last week, the Financial Accounting Standards Board issued FASB Statement No. 151, Inventory Costs, to specify that companies should report abnormal inventory amounts as charges against earnings in the current period. Abnormal inventory includes idle facility expense, freight, handling costs and wasted materials.

FASB issued the statement to make U.S. reporting consistent with international reporting, which ultimately makes it easier for investors to compare corporate reports from different nations.

FASB and the International Accounting Standards Board compared their respective standards on inventory and agreed that their intent was the same—to require that abnormal inventory amounts be expensed and not capitalized.

However, the language differed enough between the two standards to leave room for differences in...

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