FASB presented Accounting Standards Update (ASU) 2015-11 – Inventory (Topic 330) as part of its “Simplification Initiative. The objective of the Simplification Initiative is to identify, evaluate, and improve areas of generally accepted accounting principles (GAAP) for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements.” (FASB, page 1) The thought process for this update appears to be FASB’s attempt to streamline and simplify the inventory measurement reporting process moving forward. I disagree with their decision to exclude LIFO and the retail inventory method from the amendment. For the retail inventory, at some point during the business …show more content…
2015-11 have created more confusion with their “simplification” of these methods. It appears that while FASB had the opportunity to truly streamline inventory valuations, but they instead chose to muddy the waters by putting variables into play that make it more difficult for users to understand and accountants to apply. According to FASB, p. 24, “Messrs. Linsmeier and Siegel dissent from the issuance of this Accounting Standards Update because they believe that while the Board’s decision reduces costs for some preparers, it introduces additional complexity for users, preparers, auditors, and students of accounting when compared with the current reporting model.” FASB, p. 24 goes on to say, “introducing two different impairment models for inventory will cause users of financial statements to be faced with an additional layer of noncomparability in reported numbers that will further hinder comparisons of one entity to another.” The ability to compare the financial statements of similar entities within a given industry has always been an important factor for end users and investors trying to obtain a clear financial picture of the entities in question. This change reduces end users and investors the ability to compare entities in seeking to make informed decisions investing, lending or other financial