IFRS Does Not Allow the LIFO Inventory Method Because ________

question 125

Multiple Choice

IFRS does not allow the LIFO inventory method because ________.

• A) of the increased taxes owed under the LIFO method
• B) the majority of companies do not actually sell the oldest items first
• C) it is viewed as unrealistic and lacks representational faithfulness of inventory flows
• D) the FIFO method more accurately reflects the cost of inventory

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Definitions:

Capital Gain

The profit from the sale of a capital asset, such as stock, bond, or real estate, when the sale price exceeds the purchase price.

Substantially Appreciated Inventory

Inventory items whose market value exceeds their basis significantly, affecting tax considerations during their sale or donation.

Unrealized Receivables

Amounts owed to a business for goods or services delivered but not yet paid for, which have not been recognized as income.

Ordinary Income

Income earned from normal business operations or employment, subject to regular income tax rates, excluding capital gains or dividends.