Question

If companies are required to adopt IFRS, companies will _________.

1) no longer be able to use LIFO
2) have to switch to weighted average cost
3) no longer be able to use FIFO
4) have to switch to FIFO

Answer 1

If companies adopt IFRS, they will no longer be able to use LIFO and will have to switch to FIFO for inventory valuation.

Step-by-step explanation:

If companies are required to adopt IFRS (International Financial Reporting Standards), they will no longer be able to use LIFO (Last In, First Out) as a method of inventory valuation. Instead, they will have to switch to FIFO (First In, First Out), which assumes that the items purchased or produced first are sold or used first.

This change is because IFRS requires companies to use a more consistent and transparent approach to inventory valuation. The adoption of IFRS aims to harmonize accounting practices globally.

In addition to the switch from LIFO to FIFO, companies may also have to switch to weighted average cost as an alternative method of inventory valuation under IFRS.