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:

Fixed Manufacturing Overhead

This refers to the consistent costs associated with the manufacturing process that do not vary with the level of production, such as salaries of managers and depreciation of factory equipment.

Overapplied

A situation where the allocated manufacturing overhead cost is greater than the actual overhead incurred.

Volume Variance

A measurement of the difference between the expected volume of production and the actual volume produced, impacting costs.

Cost

The expenditure incurred by a business to produce, acquire, or maintain a good or service.