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 assumptions 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 U.S. GAAP differ in accounting for any subsequent reversal of that reported decline in inventory value.
Want to see the full answer?
Check out a sample textbook solutionChapter 5 Solutions
Loose Leaf for Financial Accounting: Information for Decisions
- Explain why a company might want to utilize the gross profit method or the retail inventory method for inventory valuation.arrow_forwardIdentify any differences between U.S. GAAP and International Financial Reporting Standards in the methods allowed to value inventory.arrow_forwardDiscuss the primary difference between U.S. GAAP and IFRS with respect to determining the cost of inventory.arrow_forward
- Which of the following statements is incorrect? Select one: a. By using the IFRS, goods shipped on consignment from a seller to another company should be included in the inventory of the seller. b. Many argue that LIFO provides a better matching of current costs against revenue from a financial reporting point of view. c. Both IFRS and GAAP account for inventory acquisitions at historical cost and value inventory at the lower-of-cost-or-net-realizable value subsequent to acquisition. d. Both inventory and net income are higher when companies use LIFO in a period of inflation.arrow_forwardWhich U.S. GAAP principle or rule would apply if the net realizable value of acompany’s inventory is below its original cost?a. Lower-of-cost-or-market ruleb. Consistency principlec. Disclosure principled. Historical cost principlearrow_forwardThe following information for Tuell Company is available: 1. Assume Tuell uses the LIFO cost flow assumption. what is the correct inventory value in each of the preceding situations under U.S. GAAP? 2. Assume Tuell Uses the average cost inventorγcost flow asstrmption. what is the correct inventory value in each of the preceding situations under U .S. GAAP? 3. Assume that Tuell uses the average cost inventory cost flow assumption. What is the correct inventor)' value rn each of the preceding situations if Tuell uses IFRS?arrow_forward
- If costs are rising, which inventory costing method will result in the lowest income tax expense for the company? Group of answer choices LIFO Specific identification FIFO Weighted average Which of the inventory costing methods is not permitted under International Financial Reporting Standards? Group of answer choices FIFO Specific identification LIFO Weighted average costarrow_forwardWhich of the following should not be taken into account when determining the cost of inventory? a. storage costs of part- finished goodsb. trade discountsc. recoverable purchase taxesd. import duties on shipping of inventoryarrow_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_forward
- The application of the lower of cost or market rule to inventory valuation is an example of a. the revenue realization principle b. the going concern assumption c. special industry practices d. conservatismarrow_forwardOne of the significant remaining differences between U.S. GAAP and IFRS is the treatment of inventory. Which of the following accurately states the reason for this significant difference? O IFRS does not allow LIFO. O IFRS does allow Dollar Value LIFO. O IFRS does allow Weighted Average. O IFRS does not allow FIFO.arrow_forwardWhat method does the company use to value its inventory? What other alternativesare available under IFRS? Under U.S. GAAP?arrow_forward
- Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax CollegeFinancial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage LearningFinancial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,