United States

Proposed changes to disclosure requirements for inventory


As part of its disclosure framework project, the Financial Accounting Standards Board (FASB) recently issued a proposed Accounting Standards Update (ASU), Inventory (Topic 330): Disclosure Framework – Changes to the Disclosure Requirements for Inventory. If finalized, the proposed ASU would require the following additional disclosures for all entities:

  • Inventory disaggregated by component (for example, raw materials, work-in-process, finished goods, and supplies)
  • Inventory disaggregated by measurement basis
  • Changes to the inventory balance that are not specifically related to the purchase, manufacture or sale of inventory in the ordinary course of business. Examples of items that meet this principle may include, but are not limited to, increases or decreases in the inventory balance for any of the following, if applicable:
    • Atypical losses from the subsequent measurement of inventory or shrinkage, spoilage, or damage and a description of the facts and circumstances leading to those losses
    • Balance sheet reclassifications
    • Inventory obtained through a business combination
    • Inventory disposed of through a divestiture
    • Unrealized gains and losses for inventories recorded above cost or at selling prices
  • A qualitative description of the types of costs capitalized into inventory

Entities that apply the retail inventory method for measuring inventory also would be required to provide qualitative and quantitative information about the critical assumptions used in the calculation of that inventory. In addition, entities applying the last-in, first-out (LIFO) method for measuring inventory would be required to disclose the excess of replacement cost or current cost over the LIFO inventory amount, and the effect on net income of any LIFO liquidations.

Further, entities that are subject to disclosing segment information per FASB Accounting Standards Codification Topic 280, Segment Reporting, would be required to disclose, in both annual and interim periods, inventory by reportable segment and by component for each reportable segment to the extent that information is regularly provided to the chief operating decision maker.

The FASB will determine the effective date of the proposed ASU after considering stakeholder feedback. The proposed ASU would be applied prospectively, and is available for comment until March 13, 2017.