IAS 2 vs ASC 330: what are the differences?
For the IFRS rules in full, see IAS 2 inventories explained.
| Area | IAS 2 | ASC 330 |
|---|---|---|
| Cost formulas | FIFO or weighted average; specific identification for unique items | FIFO, weighted average or LIFO; specific identification |
| Consistency | Same formula for inventories of similar nature and use | No such requirement across the business |
| Measurement | Lower of cost and net realisable value | Lower of cost and net realizable value, except LIFO and retail method: lower of cost or market |
| Reversal of write-downs | Required when value recovers, capped at original cost | Not allowed; the written-down amount becomes the new cost |
How much does LIFO change the numbers?
For FIFO and weighted average under IFRS, see FIFO vs weighted average.
A distributor buys 100 units at $10 and then 100 units at $12, and sells 100 units for $20 each.
| FIFO (IFRS or US GAAP) | LIFO (US GAAP only) | |
|---|---|---|
| Revenue | 2,000 | 2,000 |
| Cost of goods sold | 1,000 (oldest units) | 1,200 (newest units) |
| Gross profit | 1,000 | 800 |
| Closing inventory | 1,200 | 1,000 |
When prices rise, LIFO reports lower profit and lower inventory, which in the US also means lower taxable income. Over many years the gap, called the LIFO reserve, can become very large; US companies using LIFO disclose it, and analysts add it back to compare with IFRS reporters.
Why does US GAAP still allow LIFO?
Because of the US tax LIFO conformity rule: a company may use LIFO for tax only if it also uses it in its financial statements. Abolishing LIFO in US GAAP would raise taxes for those companies, so it has survived every convergence discussion. The IASB removed LIFO in 2003 because it does not reflect the actual flow of goods for most businesses.
How do inventory write-down reversals differ?
Under IAS 2 (see net realisable value), if net realisable value recovers while the inventory is still held, the write-down is reversed, but never above the original cost. Under ASC 330, a write-down at year end creates a new cost basis and is never reversed; only write-downs recognised in an interim period within the same year can be recovered by year end. See the key differences guide, which works a write-down reversal example.
What is lower of cost or market?
An older US test still used with LIFO and the retail method: market is current replacement cost, but not more than net realisable value and not less than net realisable value minus a normal profit margin. For FIFO and average cost inventory, US GAAP moved to lower of cost and net realisable value in 2015, aligning with IFRS.
Where to go next
See every IFRS and IAS in one line and the main US GAAP topics for where IAS 2 and ASC 330 sit.
Need help applying the standards?
Our Chartered Accountants help finance teams and students apply IFRS and US GAAP to real transactions.
Questions people ask
Is LIFO allowed under IFRS?
No. IAS 2 permits FIFO, weighted average cost and specific identification only. US GAAP permits LIFO.
Can inventory write-downs be reversed under US GAAP?
Not after year end: a write-down creates a new cost basis. IFRS requires reversal when value recovers, up to original cost.
What is the difference between net realisable value and lower of cost or market?
Net realisable value is estimated selling price less costs to complete and sell. Lower of cost or market, used for LIFO and the retail method in the US, uses replacement cost within a ceiling and floor.
Why does LIFO exist only in the US?
Because US tax law lets companies use LIFO for tax only if they also use it in their financial statements.
Sources
Every fee, date and rule on this page was taken from these official and primary sources.
Rules and fees change. If you are reading this long after October 4, 2026, confirm the figures with the source before you rely on them.
Related guides
More in IFRS vs US GAAP
This guide is general information. It is not tax or legal advice for your situation.