Which Inventory Cost Flow Assumption Is Allowed Under U

question 1

Essay

Which inventory cost flow assumption is allowed under U.S.GAAP but not under IFRS? Explain why some U.S.companies will lobby strongly to keep this method as an allowable alternative.

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Definitions:

Straight-Line Depreciation

A method of calculating the depreciation of an asset by evenly spreading its cost over its useful life.

Salvage Value

The estimated resale value of an asset at the end of its useful life, used in calculating depreciation expense.

Depreciation Expense

Depreciation expense is the allocated portion of the cost of a fixed asset, recognized over its useful life, reflecting its decline in value.

Useful Life

The estimated period of time over which an asset is expected to be used by an organization before it is fully depreciated.