AICPA drafts guidance on inventory valuation

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The American Institute of CPAs’ Financial Reporting Executive Committee has posted an early working draft of guidance on inventory valuation guidance, with a goal of eventually publishing a broader Business Combinations Accounting and Valuation Guide.

The goal of the guidance is to describe the various considerations for estimating the fair value of inventory, in keeping with a requirement from the Financial Accounting Standards Board that inventory acquired in a business combination should be recognized and measured at fair value as of the acquisition date.

The AICPA’s inventory guidance discusses some of the general principles for valuing inventory and includes two examples to demonstrate how to value finished goods and work in process inventory. It also provides some questions and answers about some of the considerations in valuing inventory.

“The AICPA released the inventory valuation guidance in advance of the broader guide in order to hear from valuation specialists, professionals in industry and accounting firms,” said AICPA senior manager of accounting standards for public practice Yelena Mishkevich in a statement. “We hope that fast-tracking this part of the guide will benefit all interested groups.”

The draft guidance is available here. The AICPA is asking for feedback on it by Feb. 1, 2019.

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