The Major Difference Between IFRS and GAAP in Accounting for Inventories

question 2

Multiple Choice

The major difference between IFRS and GAAP in accounting for inventories is that

• A) GAAP prohibits the use of specific identification.
• B) IFRS does not require that a physical inventory be taken.
• C) GAAP allows the use of the LIFO cost flow assumption.
• D) GAAP requires that the LIFO cost flow assumption be used.

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Definitions:

Short-Term Gain

A profit from the sale of an asset held for one year or less.

Investment Portfolio

An assortment of financial assets including stocks, bonds, commodities, cash, and equivalents, such as mutual funds and exchange-traded funds (ETFs).

Preferential Tax Treatment

Special tax rules that result in a lower tax rate or beneficial tax conditions for certain types of income or taxpayers.

Accumulated Straight-Line Depreciation

The total amount of depreciation expense recorded for an asset over its useful life, calculated using the straight-line method.