FASB Issues Inventory Standard

The Financial Accounting Standards Board has issued FASB Statement No. 151, Inventory Costs. According to FASB, the new statement, an amendment to No. 43 Chapter 4, would improve financial reporting via clarification that abnormal amounts of idle facility expense -- i.e. freight, handling costs and spoilage -- should be recognized as current-period charges. The measure also requires the allocation of fixed production overheads to inventory based on a facility's normal capacity. The standard-setter, headquartered here, said in its clarification of ARB 43 that it adopted language used in International Accounting Standard No. 2 as part of its effort toward convergence to a single set of global accounting standards. FASB said that the guidance is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The statement may be accessed from the FASB's Web site at http://www.fasb.org.