Concept explainers
International accounting standards C1 C2 P2
Answer each of the following questions related to international accounting standards.
a. Explain how the accounting for items and costs making up merchandise inventory is different between IFRS and U.S. GAAP.
b. Can companies reporting under IFRS apply a cost flow assumption in assigning costs to inventory? If yes, identify at least two acceptable cost flow assumptions.
c. Both IFRS and U.S. GAAP apply the lower of cost or market method for reporting inventory values. If inventory is written down from applying the lower of cost or market method, explain in general terms how IFRS and US. GAAP differ in accounting for any subsequent period reversal of that reported decline in inventory value.
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- What method does the company use to value its inventory? What other alternativesare available under IFRS? Under U.S. GAAP?arrow_forwardWhen comparing a US company that uses the last in, fi rst out (LIFO) method of inventory with companies that prepare their fi nancial statements under international fi nancialreporting standards (IFRS), analysts should be aware that according to IFRS, the LIFOmethod of inventory:A . is never acceptable.B . is always acceptable.C . is acceptable when applied to fi nished goods inventory onlyarrow_forwardGenerally accepted accounting principles require that the inventory of a company be reported at: Multiple Choice Market value. Historical cost. Lower of cost or market. Replacement cost. Retail value.arrow_forward
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