This reading is organized as follows:
Section 2 discusses the costs that are included in inventory and the costs that are recognised as expenses in the period in which they are incurred.
Section 3 describes inventory valuation methods and compares the measurement of ending inventory, cost of sales and gross profit under each method, and when using periodic versus perpetual inventory systems.
Section 4 describes the LIFO method, LIFO reserve, and effects of LIFO liquidations, and demonstrates the adjustments required to compare a company that uses LIFO with one that uses FIFO.
Section 5 describes the financial statement effects of a change in inventory valuation method.
Section 6 discusses the measurement and reporting of inventory when its value changes.
Section 7 describes the presentation of inventories on the financial statements and related disclosures, discusses inventory ratios and their interpretation, and shows examples of financial analysis with respect to inventories.