# ASC 330-10-30: Inventory — Overall — 30 Initial Measurement Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/330/10/#30-initial-measurement) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-09T23:50:46.569Z to 2026-09-09T23:50:46.569Z Record version: sha256:6e675c2187973b40e1548f7da8063eeb75a3a9447ee857a6040300fe9ff3a813 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 330-10-30: 30 Initial Measurement [Read section](https://asc.understandingaccounting.org/asc/330/10/#30-initial-measurement) SEC content: no #### Cost Basis ##### [330-10-30-1](https://asc.understandingaccounting.org/asc/330/10/#330-10-30-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:46.569Z to 2026-09-09T23:50:46.569Z Record version: sha256:b8ef44a573cdf88501800f0eb7325413ad6993b8d054255a1f3e92370da1a6f9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The primary basis of accounting for inventories is cost, which has been defined generally as the price paid or consideration given to acquire an asset. As applied to inventories, cost means in principle the sum of the applicable expenditures and charges directly or indirectly incurred in bringing an article to its existing condition and location. It is understood to mean acquisition and production cost, and its determination involves many considerations. ##### [330-10-30-2](https://asc.understandingaccounting.org/asc/330/10/#330-10-30-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:46.569Z to 2026-09-09T23:50:46.569Z Record version: sha256:1570c59aee9618e7bd4c1119ac659805cfb36e7b6d0b456c6e8b419e4e411b9e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Although principles for the determination of [inventory](https://asc.understandingaccounting.org/glossary/i/#inventory "The aggregate of those items of tangible personal property that have any of the following characteristics: Held for sale in the ordinary course of business In process of production for such sale To be currently consumed in the production of goods or services to be available for sale. The term inventory embraces goods awaiting sale (the merchandise of a trading concern and the finished goods of a manufacturer), goods in the course of production (work in process), and goods to be consumed directly or indirectly in production (raw materials and supplies). This definition of inventories excludes long-term assets subject to depreciation accounting, or goods which, when put into use, will be so classified. The fact that a depreciable asset is retired from regular use and held for sale does not indicate that the item should be classified as part of the inventory. Raw materials and supplies purchased for production may be used or consumed for the construction of long-term assets or other purposes not related to production, but the fact that inventory items representing a small portion of the total may not be absorbed ultimately in the production process does not require separate classification. By trade practice, operating materials and supplies of certain types of entities such as oil producers are usually treated as inventory.") costs may be easily stated, their application, particularly to such inventory items as work in process and finished goods, is difficult because of the variety of considerations in the allocation of costs and charges. ##### [330-10-30-3](https://asc.understandingaccounting.org/asc/330/10/#330-10-30-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:46.569Z to 2026-09-09T23:50:46.569Z Record version: sha256:0eae4a01df9aa6e2bdb87cbe3f24da92ffdf1c38bb71d6346d03777c3ce1db14 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For example, variable production overheads are allocated to each unit of production on the basis of the actual use of the production facilities. However, the allocation of fixed production overheads to the costs of conversion is based on the normal capacity of the production facilities. Normal capacity refers to a range of production levels. Normal capacity is the production expected to be achieved over a number of periods or seasons under normal circumstances, taking into account the loss of capacity resulting from planned maintenance. Some variation in production levels from period to period is expected and establishes the range of normal capacity. ##### [330-10-30-4](https://asc.understandingaccounting.org/asc/330/10/#330-10-30-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:46.569Z to 2026-09-09T23:50:46.569Z Record version: sha256:da3d3f937dc6d9d605fed23a1f2704ca352f71f65470fce1e2a16ffcb8342e6b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The range of normal capacity will vary based on business- and industry-specific factors. Judgment is required to determine when a production level is abnormally low (that is, outside the range of expected variation in production). ##### [330-10-30-5](https://asc.understandingaccounting.org/asc/330/10/#330-10-30-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:46.569Z to 2026-09-09T23:50:46.569Z Record version: sha256:1364e34ce38d77de392156ba2eb4ba6dad6348cd3f2c9156685068006bd06705 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Examples of factors that might be anticipated to cause an abnormally low production level include significantly reduced demand, labor and materials shortages, and unplanned facility or equipment downtime. ##### [330-10-30-6](https://asc.understandingaccounting.org/asc/330/10/#330-10-30-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:46.569Z to 2026-09-09T23:50:46.569Z Record version: sha256:d2137c242abf90807ebdbfcdaf56c71a72a0b90f8990720739dda99e4b5eba65 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The actual level of production may be used if it approximates normal capacity. In periods of abnormally high production, the amount of fixed overhead allocated to each unit of production shall be decreased so that inventories are not measured above cost. The amount of fixed overhead allocated to each unit of production shall not be increased as a consequence of abnormally low production or idle plant. ##### [330-10-30-7](https://asc.understandingaccounting.org/asc/330/10/#330-10-30-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:46.569Z to 2026-09-09T23:50:46.569Z Record version: sha256:a4f18e34fc5c681e4cd13fa07c04cac29db6f2bcfc3b3375630cc13457f2cc76 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Unallocated overheads shall be recognized as an expense in the period in which they are incurred. Other items such as abnormal freight, handling costs, and amounts of wasted materials (spoilage) require treatment as current period charges rather than as a portion of the inventory cost. ##### [330-10-30-8](https://asc.understandingaccounting.org/asc/330/10/#330-10-30-8) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:46.569Z to 2026-09-09T23:50:46.569Z Record version: sha256:9297f993ac4d4ebfd94b177fd884ec1ae563280ec4cae9437ea3aff83d604423 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Also, under most circumstances, general and administrative expenses shall be included as period charges, except for the portion of such expenses that may be clearly related to production and thus constitute a part of inventory costs (product charges). Selling expenses constitute no part of inventory costs. The exclusion of all overheads from inventory costs does not constitute an accepted accounting procedure. The exercise of judgment in an individual situation involves a consideration of the adequacy of the procedures of the cost accounting system in use, the soundness of the principles thereof, and their consistent application. General and administrative expenses ordinarily shall be charged to expense as incurred. #### Determination of Inventory Costs ##### [330-10-30-9](https://asc.understandingaccounting.org/asc/330/10/#330-10-30-9) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:46.569Z to 2026-09-09T23:50:46.569Z Record version: sha256:cd31f4f6495ca94c8d2ec57347581247b8c6ebe50725a70d6ba1b58d5a0afc1f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Cost for inventory purposes may be determined under any one of several assumptions as to the flow of cost factors, such as first-in first-out (FIFO), average, and last-in first-out (LIFO). The major objective in selecting a method should be to choose the one which, under the circumstances, most clearly reflects periodic income. ##### [330-10-30-10](https://asc.understandingaccounting.org/asc/330/10/#330-10-30-10) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:46.569Z to 2026-09-09T23:50:46.569Z Record version: sha256:282d214ae0cacba40bc4a12c0dc7f09f6bc73562e66a7d58b67cb217a01756db Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The cost to be matched against revenue from a sale may not be the identified cost of the specific item which is sold, especially in cases in which similar goods are purchased at different times and at different prices. While in some lines of business specific lots are clearly identified from the time of purchase through the time of sale and are costed on this basis, ordinarily the identity of goods is lost between the time of acquisition and the time of sale. ##### [330-10-30-11](https://asc.understandingaccounting.org/asc/330/10/#330-10-30-11) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:46.569Z to 2026-09-09T23:50:46.569Z Record version: sha256:53d99b055580e4483362bfd9face4b197e7ed689ab1fa852fdacff6fd8663729 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Accordingly, if the materials purchased in various lots are identical and interchangeable, the use of identified cost of the various lots may not produce the most useful financial statements. This fact has resulted in the general acceptance of several assumptions with respect to the flow of cost factors such as FIFO, average, and LIFO to provide practical bases for the measurement of periodic income. ##### [330-10-30-12](https://asc.understandingaccounting.org/asc/330/10/#330-10-30-12) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:46.569Z to 2026-09-09T23:50:46.569Z Record version: sha256:b7d57cd3e88645916133665afec6a5568674f5493d1a73d9e9ef8d72f2f76179 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Standard costs are acceptable if adjusted at reasonable intervals to reflect current conditions so that at the balance-sheet date standard costs reasonably approximate costs computed under one of the recognized bases. In such cases descriptive language shall be used which will express this relationship, as, for instance, "approximate costs determined on the first-in first-out basis," or, if it is desired to mention standard costs, "at standard costs, approximating average costs." ##### [330-10-30-13](https://asc.understandingaccounting.org/asc/330/10/#330-10-30-13) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:46.569Z to 2026-09-09T23:50:46.569Z Record version: sha256:c14fc7947a3a07d9faecf07096e056d04a9e59a10948bd58516f5549f5466841 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In some situations a reversed mark-up procedure of inventory pricing, such as the retail inventory method, may be both practical and appropriate. The business operations in some cases may be such as to make it desirable to apply one of the acceptable methods of determining cost to one portion of the inventory or components thereof and another of the acceptable methods to other portions of the inventory. ##### [330-10-30-14](https://asc.understandingaccounting.org/asc/330/10/#330-10-30-14) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:46.569Z to 2026-09-09T23:50:46.569Z Record version: sha256:deecb0471c3d70b32eb62079d40959de5e3a75325d5dcad09ac20e7f95263f40 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Although selection of the method should be made on the basis of the individual circumstances, financial statements will be more useful if uniform methods of inventory pricing are adopted by all entities within a given industry. #### Consistency Required ##### [330-10-30-15](https://asc.understandingaccounting.org/asc/330/10/#330-10-30-15) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:46.569Z to 2026-09-09T23:50:46.569Z Record version: sha256:60a757251608c334d100598ab06f3f92331ff2962c37632c4885b01d76d41bdd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. While the basis of stating inventories does not affect the overall gain or loss on the ultimate disposition of inventory items, any inconsistency in the selection or employment of a basis may improperly affect the periodic amounts of income or loss. Because of the common use and importance of periodic statements, a procedure adopted for the treatment of inventory items shall be consistently applied in order that the results reported may be fairly allocated between years. #### Purchases and Sales of Inventory with the Same Counterparty ##### [330-10-30-16](https://asc.understandingaccounting.org/asc/330/10/#330-10-30-16) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:46.569Z to 2026-09-09T23:50:46.569Z Record version: sha256:c948b87110a8db34f83ed0c3174a72bf3451c9d5d28ebd47038d4fa7b698b20f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For a discussion of the initial measurement of inventory purchased from an entity to which it also sells inventory in the same line of business, see paragraphs [845-10-55-10 through 55-26](https://asc.understandingaccounting.org/asc/845/10/#845-10-55-10) . #### Costs Resulting from Share-Based Payment Transactions ##### [330-10-30-17](https://asc.understandingaccounting.org/asc/330/10/#330-10-30-17) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:46.569Z to 2026-09-09T23:50:46.569Z Record version: sha256:ccc669768e997925856520c08601ea02e5484200d9025c68bc05036758b45018 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [718-10-25-2](https://asc.understandingaccounting.org/asc/718/10/#718-10-25-2) for a discussion of share-based payment capitalized as a part of inventory. #### Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed ##### [330-10-30-18](https://asc.understandingaccounting.org/asc/330/10/#330-10-30-18) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:46.569Z to 2026-09-09T23:50:46.569Z Record version: sha256:16ee91629192aadbcfbc73a669a8cd9b8eec333c1de374d10fa366d892dae976 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Sections 985-20-25 and 985-20-35 and paragraphs [985-20-55-2 through 55-3](https://asc.understandingaccounting.org/asc/985/20/#985-20-55-2) for a discussion of accounting for the costs of producing and acquiring computer software, including software that is marketed as part of a product or process. ##### [330-10-30-19](https://asc.understandingaccounting.org/asc/330/10/#330-10-30-19) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:46.569Z to 2026-09-09T23:50:46.569Z Record version: sha256:e41c3fcdc68aae41cd4dbd43775d76da5eb20fd8db73e77698718d79d2096aff Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). #### Costs to Fulfill a Contract with a Customer ##### [330-10-30-20](https://asc.understandingaccounting.org/asc/330/10/#330-10-30-20) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:46.569Z to 2026-09-09T23:50:46.569Z Record version: sha256:228d2d5f6d6f4d131d193a0dacf2c5880be93b0a4f0570f2abde30d794b5ce6a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraphs [340-40-25-5 through 25-8](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-5) and paragraphs [340-40-35-1 through 35-6](https://asc.understandingaccounting.org/asc/340/40/#340-40-35-1) for the accounting for the costs to fulfill a contract with a customer if those costs are not in the scope of another Topic. #### Indirect Contract Costs by Government Contractors ##### [330-10-30-21](https://asc.understandingaccounting.org/asc/330/10/#330-10-30-21) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:46.569Z to 2026-09-09T23:50:46.569Z Record version: sha256:adf8f1a6e704b42908f81f6a1a0da18bc417a66b29d43bb63278702197f0f40a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [912-20-25-1](https://asc.understandingaccounting.org/asc/912/20/#912-20-25-1) for the accounting for indirect contract costs by government contractors.