Question

Under IFRS, which of the following methods is not acceptable for the valuation of inventory?

a) LIFO.
b) FIFO.
c) Average cost.
d) Specific identification.

Answer 1

Under IFRS, LIFO is not an acceptable inventory valuation method, whereas FIFO, average cost, and specific identification are permitted.

Step-by-step explanation:

Under IFRS, the LIFO (Last-In, First-Out) method is not acceptable for the valuation of inventory. LIFO assumes that the most recent inventory purchased is the first to be sold, which is not by IFRS guidelines. FIFO (First-In, First-Out), average cost, and specific identification methods are all acceptable for the valuation of inventory under IFRS.

Under International Financial Reporting Standards (IFRS), the method that is not acceptable for the valuation of inventory is the Last-In, First-Out (LIFO) method. IFRS allows for several inventory valuation methods, including the First-In, First-Out (FIFO) method, the average cost method, and the specific identification method. However, LIFO is not permitted as it is not considered to reflect the actual flow of inventory in most cases and can lead to inventory being reported at outdated costs.