Is standard costing allowable in GAAP and IFRS?

Both Generally Accepted Accounting Principles and International Financial Reporting Standards require that an entity report its actual costs incurred when reporting expenses.

This initially appears to be at odds with standard costing, where the industrial engineering staff typically derives standard material and labor costs. Standards are used instead of actual costs, because it is considerably easier to compile standard costs.

The cost accountant should be calculating the variances between the actual cost of goods sold, and recording the variances within the cost of goods sold in every financial reporting period. As long as these variances are being recorded, there is no difference between actual and standard costs; in this situation, you can use standard costing and still be in compliance with both GAAP and IFRS.