Asked by Mrs. Steph Bishop on Apr 27, 2024
Verified
Because IFRS do not permit the use of LIFO,inventory holding gains are included in income.
IFRS
International Financial Reporting Standards, a set of accounting standards developed by the International Accounting Standards Board that is used globally for the preparation of public company financial statements.
Inventory Holding Gains
Gains resulting from an increase in the value of inventory that a company holds over a period.
- Comprehend the variances in inventory valuation methods as per U.S. GAAP compared to IFRS.
Verified Answer
AP
Ashley PerrineApr 28, 2024
Final Answer :
True
Explanation :
IFRS prohibits the use of Last-In, First-Out (LIFO) accounting method for inventory valuation. Under LIFO, the cost of the latest goods purchased or produced is matched with the revenue from the latest sales, resulting in a lower profit margin during times of inflation. Since IFRS does not allow LIFO, companies must use other methods such as First-In, First-Out (FIFO) or weighted average cost accounting, which may result in inventory holding gains being included in income. Thus, the statement is true.
Learning Objectives
- Comprehend the variances in inventory valuation methods as per U.S. GAAP compared to IFRS.
Related questions
IFRS Requires the Use of Absorption Costing
GAAP's Definition for Inventory and Provision of Guidelines for Inventory ...
GAAP's Provision for Ownership of Goods (Goods-In-Transit or Consigned Goods) \(\begin{array} ...
IFRS Do Not Allow the Use of LIFO Because It ...
The IFRS Disallow the Use of LIFO for External Financial ...