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Excellent Corp., a foreign company, is listed in the U.S. stock exchange. It follows Local GAAP. The income statement of Excellent Corp. reported 165 as

Excellent Corp., a foreign company, is listed in the U.S. stock exchange. It follows Local GAAP. The income statement of Excellent Corp. reported 165 as indirect costs related to inventory. The Local GAAP treats these as operating expense. When reconciling Excellent Corp's financial statements to U.S. GAAP, how should be these indirect costs treated?

These should be treated as operating expenses in the period in which they are incurred.

These costs are treated as product costs and are expensed as cost of goods sold when inventory is sold.

The entire amount will be shown on the liability side of the balance sheet.

This amount should be adjusted through the revaluation of inventories.

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