Question

Based on Bed Bath & Beyond’s 2019 10-K. If Bed Bath & Beyond adopted IFRS would its reporting for inventory differ? Briefly explain. Identify other areas that would be impacted if your company adopted IFRS.

Answer 1

Under GAAP, inventory is recorded as the lesser of cost or market value. According to the Financial Accounting Standards Board (FASB) the organization responsible for interpreting and modifying GAAP, market value is defined as the current replacement cost as limited by net realizable value.

The IFRS lays down slightly different costing rules. It states that inventory is measured as the lesser of cost or net realizable value.

DISCLOSURE IN NOTES TO ACCOUNTS Under IndAS 2

• Policies adopted in measuring inventories.
• Value of inventories in different head of inventories like Raw material, WIP, Finished goods and stores and tools.
• Written down of inventories in current year and their reversal.
• Inventories pledged as security.

Separate disclosure should be given under notes to accounts for reversal of write down if realisable value of inventories increased above cost

point out four advantages resulting from IFRS adoption.

First, such adoption will trigger greater investors' ability to make informed financial decisions, eliminating confusion that arises from the existence of different ways to measure status and financial performance in different countries, leading to reduced risk for investors and lower cost of capital for companies. Second, it will lead to reduced costs related to preparation of financial information according to several sets of standards. Third, it will lead to greater incentives for international investment. Fourth, it will allow a more effective allocation of financial resources worldwide.

1- IFRS adoption has a positive effect on information quality. It is understood that there is a positive effect when the information disclosed in accordance with IFRS has higher quality (higher relevant value, lower level of outcome management, etc.) than when it was disclosed in accordance with local standards.

2-IFRS adoption has a positive effect on the capital market. It is understood that there is a positive effect when IFRS adoption improves operating conditions in the capital market, because it leads to lower cost of capital, lower synchronicity of actions, attraction of institutional investors and foreign investors, including others.

3-IFRS adoption has a positive effect on analysts. It is understood that there is a positive effect when IFRS adoption, rather than local standards, leads to an increased analysts' ability to predict.

4-IFRS adoption has a positive effect on information comparability. It is understood that there is a positive effect when information is more comparable in an IFRS environment than when local standards are applied.

5-IFRS adoption has a negative effect on information cost. It is understood that there is a negative effect when IFRS adoption leads to an increase in costs for companies, particularly regarding audit fees.

6-IFRS adoption has a positive effect on information use, to the extent that the accounting information prepared according to IFRS is seen as having higher quality and, as a consequence, it is more frequently used in executive pay