FASB issued Statement no. 151 , Inventory Costs
(
www.fasb.org/st/index.shtml ), an amendment of Accounting
Research Bulletin (ARB) no. 43, chapter 4. The statement clarifies
that abnormal amounts of idle facility expense, freight and/or
handling costs and wasted materials (that is, spoilage) should be
recognized as current-period charges, and it requires the allocation
of fixed production overheads to inventory based on the normal
capacity of the production facilities. The guidance is effective for
inventory costs incurred during fiscal years beginning after June 15,
2005, but earlier application is permitted for costs incurred during
fiscal years beginning after November 23, 2004. The statement’s
provisions should be applied prospectively.
Accounting
