Textbook Problem

IFRS Activity 3

Under U.S. GAAP, LIFO is an acceptable inventory method. Financial statement information for three companies that use LIFO follows. All table numbers are in millions of dollars.

*Autos and trucks only

Assume that these companies adopted IFRS and thus were required to use FIFO rather than LIFO.

1. a. Prepare a table with the following columns:

1. (1) Difference between FIFO and LIFO inventory valuation
2. (2) Revised IFRS net income using FIFO
3. (3) Difference between FIFO and LIFO inventory valuation as a percent of total current assets (rounded to the nearest whole percent)
4. (4) Revised IFRS net income as a percent of the reported net income (rounded to the nearest whole percent)
5. b. Complete the table for the three companies.
6. c. For which company would a change to IFRS for inventory valuation have the largest percentage impact on total current assets (Col. 3)?
7. d. For which company would a change to IFRS for inventory valuation have the largest percentage impact on net income (Col. 4)?
8. e. Why might Kroger have a negative impact on net income from using LIFO, while the other two companies have a positive impact on net income from using LIFO?