In inventory valuation, which method is NOT acceptable under accounting standards?
Practice Questions
1 question
Q1
In inventory valuation, which method is NOT acceptable under accounting standards?
FIFO
LIFO
Weighted Average Cost
Specific Identification
LIFO (Last In, First Out) is not accepted under IFRS accounting standards, although it is allowed under US GAAP.
Questions & Step-by-step Solutions
1 item
Q
Q: In inventory valuation, which method is NOT acceptable under accounting standards?
Solution: LIFO (Last In, First Out) is not accepted under IFRS accounting standards, although it is allowed under US GAAP.
Steps: 6
Step 1: Understand what inventory valuation means. It is how a company values its inventory for financial reporting.
Step 2: Learn about different inventory valuation methods. Common methods include FIFO (First In, First Out), LIFO (Last In, First Out), and weighted average cost.
Step 3: Know the accounting standards. IFRS (International Financial Reporting Standards) and US GAAP (Generally Accepted Accounting Principles) are two sets of rules for financial reporting.
Step 4: Identify which methods are accepted under these standards. FIFO and weighted average cost are accepted under both IFRS and US GAAP.
Step 5: Recognize that LIFO is allowed under US GAAP but is not accepted under IFRS.
Step 6: Conclude that LIFO is the method that is NOT acceptable under IFRS accounting standards.
