ASBJ 09
Accounting Standard for Measurement of Inventories
Accounting Standard for Measurement of Inventories is part of the Japan GAAP framework.
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Conceptual Framework Linkage
A deliberate convergence move – bringing J-GAAP into line with IAS 2
ASBJ Statement No. 9 governs the MEASUREMENT of inventories (棚卸資産) – the COST formulas an entity may use, and the requirement to write inventories DOWN when their value has genuinely DECLINED below cost. A NOTABLE feature of this Statement is that its DEVELOPMENT specifically ELIMINATED the LAST-IN, FIRST-OUT (LIFO) cost formula from acceptable J-GAAP practice – a DELIBERATE convergence move aligning Japanese practice with IAS 2's LONG-STANDING prohibition of LIFO internationally.
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Scope
All companies holding inventories
This Statement applies to ALL companies holding inventories – merchandise, finished goods, work in progress, raw materials, and supplies – held for SALE in the ordinary course of business or CONSUMPTION in producing goods or services for sale.
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Lower of Cost and Net Realisable Value
The core measurement principle
Inventories are measured at the LOWER of their determined COST and NET REALISABLE VALUE (正味売却価額, "net selling value") – where an item's net realisable value has FALLEN below its recorded cost, the carrying amount must be WRITTEN DOWN to reflect the LOWER, currently-recoverable amount, consistent with the general principle that assets should NOT be carried above their recoverable economic value.
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Acceptable Cost Formulas – and the Elimination of LIFO
FIFO, weighted average, and specific identification – LIFO no longer permitted
Acceptable cost formulas under this Statement include FIRST-IN, FIRST-OUT (FIFO), WEIGHTED AVERAGE cost, and SPECIFIC IDENTIFICATION for uniquely identifiable items. LAST-IN, FIRST-OUT (LIFO) – historically PERMITTED under EARLIER Japanese practice – was SPECIFICALLY ELIMINATED as an acceptable cost formula through this Statement's development, a deliberate step bringing J-GAAP INTO ALIGNMENT with IAS 2, which has LONG PROHIBITED LIFO internationally.
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Write-Down to Net Realisable Value – Presentation
Generally within cost of sales, unless the decline is unusual in nature or scale
A write-down to net realisable value is generally presented WITHIN cost of sales – reflecting the ORDINARY, recurring nature of typical inventory valuation declines. Where the DECLINE is UNUSUAL in nature or SIGNIFICANT in scale (e.g. reflecting a natural disaster or an extraordinary market disruption), it may instead be presented as a SEPARATE, distinctly labelled loss.
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Reversal of Write-Downs
Permitted where net realisable value subsequently recovers
Where an item's NET REALISABLE VALUE subsequently RECOVERS in a LATER period (after a previous write-down), the write-down may be REVERSED – but ONLY up to the ORIGINAL cost figure, NEVER above it – consistent with IAS 2's own reversal requirement, and reflecting that the write-down was always intended to capture a genuine, though not necessarily PERMANENT, decline in value.
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Worked Example – a Write-Down to Net Realisable Value
Writing inventory down to its recoverable amount
Example: Obsolete finished goods inventory
A company holds finished goods inventory with a recorded cost of ¥60,000,000. Due to a sudden shift in market demand, the estimated net realisable value has fallen to ¥45,000,000.
The company writes the inventory DOWN by ¥15,000,000 (¥60,000,000 − ¥45,000,000), recognising the amount generally WITHIN cost of sales, bringing the carrying amount to ¥45,000,000 – reflecting the LOWER of cost and net realisable value.
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Worked Example – Reversal of a Prior Write-Down
Recovering value, capped at original cost
Example: Demand recovers in a later period
Continuing the prior example, market demand RECOVERS in the following period, and the SAME inventory's net realisable value rises back to ¥58,000,000 (still below the original ¥60,000,000 cost).
The company REVERSES ¥13,000,000 of the prior write-down (¥58,000,000 − ¥45,000,000), bringing the carrying amount up to ¥58,000,000 – but NOT above the ORIGINAL ¥60,000,000 cost, even if net realisable value were to recover further still.
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Disclosure Requirements
What ASBJ Statement No. 9 requires
Accounting policy for inventory cost formula and measurement basisAmount of inventories carried at net realisable value, and write-downs recognised during the periodAmount of any reversal of previous write-downs recognised during the period
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Critical Judgments & Estimates
Where judgement matters most
SIGNIFICANT JUDGEMENTS
Whether an inventory value decline is ordinary/recurring versus unusual, affecting presentation
SIGNIFICANT ESTIMATES
Estimated net realisable value, based on expected selling price less estimated costs to complete and sell
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Relationship to IAS/IFRS – and the Contrast With US GAAP
Comparison across all three major frameworks
FeatureJ-GAAP (ASBJ Statement No. 9)IFRS (IAS 2) / US GAAP
LIFO permittedNO – eliminatedIFRS: NO (never permitted). US GAAP: YES – LIFO remains permitted
Reversal of write-downsPERMITTED, capped at original costIFRS: PERMITTED, capped at original cost – converged. US GAAP: NOT permitted once written down
Japan's elimination of LIFO was a DELIBERATE step TOWARD IFRS, moving AWAY from where US GAAP still stands – one of the clearer examples of J-GAAP choosing IFRS convergence over alignment with US practice on a SPECIFIC measurement question.
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Statement Mapping
Where every inventory measurement event lands
EventStatement(s) affectedNotes
Write-down to net realisable valueBS P&LGenerally within cost of sales
Reversal of a prior write-downBS P&LCapped at original cost
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Related Standards
Cross-reference map
StandardConnection
ASBJ Statement No. 29Revenue Recognition – governs when inventory sales are recognised, working alongside this Statement's measurement principles
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Quick-Reference Glossary
Net realisable value (正味売却価額)
Estimated selling price less estimated costs to complete and sell, the ceiling used alongside cost for the lower-of measurement.
LIFO (Last-In, First-Out) – eliminated
A cost formula historically permitted under earlier Japanese practice, removed from acceptable use as part of this Statement's convergence with IAS 2.
Financial statement key (Japan GAAP terminology)
BS Balance Sheet (貸借対照表) P&L Statement of Income / Profit and Loss Statement (損益計算書) Net Assets 純資産の部 SCNA Statement of Changes in Net Assets (株主資本等変動計算書) SCF Statement of Cash Flows (キャッシュ・フロー計算書)