International Financial Reporting Standards (IFRS) and Inventory Valuation for Retail Companies

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IFRS, the SEC and a roadmap for the future.

The emergence of IFRS (International Financial Reporting Standards) as a global accounting standard and its proposed phased adoption by the SEC has lent a sense of urgency to U.S. businesses trying to determine what impact the changes will have on them. Retail companies are especially concerned about what it might mean to inventory valuation, given that the system most commonly used today, Retail Inventory Method or RIM, is not completely compatible with IFRS. Companies might consider moving to a weighted average type of Cost Method Accounting (CMA) which does comply with IFRS requirements and offers other significant strategic benefits as well.