The following information pertains to inventory held by a company on December 31, 2011. As a result of inventory loss, what is the difference in income between reporting using U.S. GAAP and IFRS?

Question

The following information pertains to inventory held by a company on December 31, 2011.  As a result of inventory loss, what is the difference in income between reporting using U.S. GAAP and IFRS?

Quizplus · Accepted Answer

According to the information given, the inventory loss of $13,200 is recognized under IFRS as a separate line item on the income statement, resulting in a decrease in income of $5,400. However, under U.S. GAAP, the inventory loss is included in cost of goods sold, resulting in a decrease in income of $10,800. Therefore, the difference in income between reporting using U.S. GAAP and IFRS is $5,400 higher under IFRS.

The Following Information Pertains to Inventory Held by a Company