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Will the FASB ever force all businesses to use one type of valuation process? Like FIFO...

Will the FASB ever force all businesses to use one type of valuation process? Like FIFO or LIFO?

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Answer #1

FASB (Financial Accounting Standard Board) has proposed to exclude the inventory measured using FIFO and reatil inventory methods. It was proposed in order to reduce the complexities or cost of the subsequent measurements of inventory while maintaining or improving the usefulness of information to be reported by an entity.

FASB has heard from stakeholders thats the guidance on measurement of the inventory is unnecessarily complex because there are several potential outcomes. The objective of simplification Initiatives is to identify, evaluate and improve areas of generally accepted accounting principles (GAAP) for which cost& complexity can be reduced.

In order to reduce thr complexity of measuring the inventory the Board may decide to implement a lower of cost or net realizable value model for inventory rather than using methods for LIFO or retail inventory methods

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