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Which accounting standard allows the use of LIFO for inventory valuation?

Practice Questions

Q1
Which accounting standard allows the use of LIFO for inventory valuation?
  1. IFRS
  2. GAAP
  3. Both IFRS and GAAP
  4. Neither IFRS nor GAAP

Questions & Step-by-Step Solutions

Which accounting standard allows the use of LIFO for inventory valuation?
  • Step 1: Understand what LIFO means. LIFO stands for 'Last In, First Out', which is a method of valuing inventory.
  • Step 2: Learn about accounting standards. There are different sets of rules for accounting, two of the main ones are GAAP and IFRS.
  • Step 3: Know what GAAP is. GAAP stands for 'Generally Accepted Accounting Principles', which is used mainly in the United States.
  • Step 4: Know what IFRS is. IFRS stands for 'International Financial Reporting Standards', which is used in many other countries around the world.
  • Step 5: Find out if LIFO is allowed. Under GAAP, companies can use LIFO for inventory valuation.
  • Step 6: Check if LIFO is allowed under IFRS. Under IFRS, companies are not allowed to use LIFO for inventory valuation.
  • Step 7: Conclude that GAAP allows LIFO, while IFRS does not.
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