{"id":4442,"date":"2019-08-28T17:36:00","date_gmt":"2019-08-28T17:36:00","guid":{"rendered":"https:\/\/analystprep.com\/cfa-level-1-exam\/?p=4442"},"modified":"2026-06-01T09:00:18","modified_gmt":"2026-06-01T09:00:18","slug":"presentation-disclosures-inventories","status":"publish","type":"post","link":"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/presentation-disclosures-inventories\/","title":{"rendered":"Presentation and Disclosures Relating to Inventories"},"content":{"rendered":"\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"QAPage\",\n  \"mainEntity\": {\n    \"@type\": \"Question\",\n    \"name\": \"Under US GAAP, which inventory disclosure is least likely to be required?\",\n    \"text\": \"Under US GAAP, which of the following is least likely a relevant disclosure relating to inventories? A. The accounting policies adopted in measuring inventories. B. The amount of inventories recognized as an expense during the period. C. The circumstances which led to the reversal of a write-down of inventories.\",\n    \"answerCount\": 3,\n    \"suggestedAnswer\": [\n      {\n        \"@type\": \"Answer\",\n        \"text\": \"A. The accounting policies adopted in measuring inventories.\"\n      },\n      {\n        \"@type\": \"Answer\",\n        \"text\": \"B. The amount of inventories recognized as an expense during the period.\"\n      },\n      {\n        \"@type\": \"Answer\",\n        \"text\": \"C. The circumstances which led to the reversal of a write-down of inventories.\"\n      }\n    ],\n    \"acceptedAnswer\": {\n      \"@type\": \"Answer\",\n      \"text\": \"The correct answer is C. Under US GAAP, reversals of prior inventory write-downs are not permitted. As a result, disclosures regarding the circumstances leading to a reversal of an inventory write-down are not required. However, disclosures relating to inventory accounting policies and the amount of inventory recognized as an expense during the period are required.\"\n    },\n    \"author\": {\n      \"@type\": \"Organization\",\n      \"name\": \"AnalystPrep\"\n    }\n  }\n}\n<\/script>\n\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"QAPage\",\n  \"mainEntity\": {\n    \"@type\": \"Question\",\n    \"name\": \"Which inventory disclosure is required under IFRS but not under US GAAP?\",\n    \"text\": \"Which of the following inventory disclosures is required under IFRS but not under US GAAP? A. Information related to inventory write-downs. B. Information related to inventory write-down reversals. C. Information related to the carrying amount of each inventory category.\",\n    \"answerCount\": 3,\n    \"suggestedAnswer\": [\n      {\n        \"@type\": \"Answer\",\n        \"text\": \"A. Information related to inventory write-downs.\"\n      },\n      {\n        \"@type\": \"Answer\",\n        \"text\": \"B. Information related to inventory write-down reversals.\"\n      },\n      {\n        \"@type\": \"Answer\",\n        \"text\": \"C. Information related to the carrying amount of each inventory category.\"\n      }\n    ],\n    \"acceptedAnswer\": {\n      \"@type\": \"Answer\",\n      \"text\": \"The correct answer is B. IFRS permits the reversal of inventory write-downs when circumstances justify it and therefore requires disclosure of such reversals. US GAAP does not permit inventory write-down reversals and consequently does not require related disclosures.\"\n    },\n    \"author\": {\n      \"@type\": \"Organization\",\n      \"name\": \"AnalystPrep\"\n    }\n  }\n}\n<\/script>\n\n\n<p><iframe loading=\"lazy\" src=\"\/\/www.youtube.com\/embed\/l-UYPyppmzs\" width=\"611\" height=\"343\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<p>Disclosures are very useful to users of financial statements, especially when analyzing a company\u2019s performance. Coincidentally, the disclosure and presentation requirements are very similar under IFRS and US GAAP.<\/p>\n<h2><strong>Presentation and Disclosures Relating to Inventories<\/strong><\/h2>\n<p>Under IFRS, the following financial statement disclosures concerning inventories are required:<\/p>\n<ul>\n<li>the accounting policies that were adopted in measuring inventories, including the cost formula used;<\/li>\n<li>the total carrying amount of inventories and the carrying amount in classifications that are appropriate to the entity;<\/li>\n<li>the carrying amount of inventories that are carried at fair value less the costs to sell;<\/li>\n<li>the amount of inventories that are recognized as an expense during the reporting period;<\/li>\n<li>the amount of any write-down of inventories that are recognized as an expense in the reporting period;<\/li>\n<li>the amount of any reversal of any write-down that is recognized as a reduction in the cost of sales during the reporting period;<\/li>\n<li>the circumstances or events which have led to the reversal of a write-down of inventories; and<\/li>\n<li>the carrying amount of inventories that are pledged as security for liabilities.<\/li>\n<\/ul>\n<p>The inventory-related disclosures under US GAAP are quite similar to those under IFRS. However, the second and third requirements from the bottom of the above list are irrelevant since US GAAP prohibits the reversal of prior-year inventory write-downs. In addition, US GAAP requires disclosure of significant estimates applicable to inventories and any material amount of income that results from the liquidation of LIFO inventory.<\/p>\n<blockquote>\n<h3><strong>Question 1<\/strong><\/h3>\n<p>Under US GAAP, which of the following is <em>least likely<\/em> a relevant disclosure relating to inventories?<\/p>\n<ol style=\"list-style-type: upper-alpha;\">\n<li data-tadv-p=\"keep\">The accounting policies adopted in measuring inventories.<\/li>\n<li data-tadv-p=\"keep\">The amount of inventories recognized as an expense during the period.<\/li>\n<li data-tadv-p=\"keep\">The circumstances which led to the reversal of a write-down of inventories.<\/li>\n<\/ol>\n<p><strong>Solution<\/strong><\/p>\n<p>The correct answer is <strong>C<\/strong>.<\/p>\n<p>Under US GAAP, the circumstance which led to the reversal of a write-down of inventories is not a relevant requirement because US GAAP does not permit the reversal of prior-year inventory write-downs.<\/p>\n<p>Options A and B give relevant disclosure requirements.<\/p>\n<h3><strong>Question 2<\/strong><\/h3>\n<p>The financial disclosure information required by the IFRS, but not US GAAP is:<\/p>\n<ol style=\"list-style-type: upper-alpha;\">\n<li data-tadv-p=\"keep\">Information related to inventory write-downs.<\/li>\n<li data-tadv-p=\"keep\">Information related to inventory write-down reversals.<\/li>\n<li data-tadv-p=\"keep\">Information related to the carrying amount of each inventory section.<\/li>\n<\/ol>\n<p><strong>Solution<\/strong><\/p>\n<p>The correct answer is <strong>B<\/strong>.<\/p>\n<p>US GAAP does not require the disclosure of write-down reversals because it does not allow for the reversal of write-downs.<\/p>\n<\/blockquote>\n\n\n<div style=\"text-align: center; margin: 30px 0;\"><a style=\"display: inline-flex; align-items: center; justify-content: center; padding: 12px 26px; border-radius: 9999px; background: #1e5bd8; color: #ffffff; font-weight: bold; text-decoration: none;\" href=\"https:\/\/analystprep.com\/free-trial\/\" target=\"_blank\" rel=\"noopener noreferrer\"> Start Free Trial \u2192 <\/a><p style=\"margin-top: 12px; font-size: 16px; line-height: 1.5;\">Access CFA Level I financial reporting and analysis study notes, practice questions, mock exams, and video lessons to strengthen your understanding of inventory presentation and disclosure requirements.<\/p><\/div>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Disclosures are very useful to users of financial statements, especially when analyzing a company\u2019s performance. Coincidentally, the disclosure and presentation requirements are very similar under IFRS and US GAAP. Presentation and Disclosures Relating to Inventories Under IFRS, the following financial&#8230;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5],"tags":[],"class_list":["post-4442","post","type-post","status-publish","format-standard","hentry","category-financial-reporting-and-analysis","blog-post","no-post-thumbnail","animate"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.6 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Inventory Presentation &amp; Disclosures | CFA Level 1<\/title>\n<meta name=\"description\" content=\"Learn inventory presentation and disclosures, including valuation methods like FIFO, average cost, and accounting policies under US GAAP standards.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, 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