Question

What are the key differences to the generally accepted accounting principles according to the FASB Codification...

What are the key differences to the generally accepted accounting principles according to the FASB Codification and tax guidance vs. treated for tax purposes under the Internal Revenue Code from the list below:

LIFO vs. FIFO Inventory

Goodwill

Homework Answers

Answer #1

1. LIFO vs FIFO-

FASB allows any of three methods namely FIFO, LIFO or weighted average. Also, retail inventory method is allowed under some circumstances.

As per Internal Revenue Code provides two tests to which each inventory must conform: conform as nearly as may be to the best accounting practice in the trade or business and It must clearly reflect the income. There are three general methods which allows valuation- First-in, First-out (FIFO); Last-in, First-out (LIFO); and Weighted-Average Cost.

2. Goodwill-

As per US GAAP, Goodwill shall be depreciated over hall be amortized on a straight-line basis over 10 years, or less than 10 years if an entity demonstrates that another useful life is more appropriate.

As per Internal Revenue code, goodwill acquired in a taxable asset purchase are allowed to be amortized over 15 years and is tax-deductible.

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