Question

Which of the following statements is true?

A. IFRS specifically prohibits the use of the multi-step income statement.
B. IFRS requires the use of the perpetual inventory method.
C. Under IFRS, revaluation of land, buildings and intangible assets is prohibited.
D. Under IFRS, companies must classify expenses by either nature or function.

Answer 1

The statement 'Under IFRS, companies must classify expenses by either nature or function' is true following IAS 1. IFRS does not prohibit the multi-step income statement, require the perpetual inventory method, or prohibit the revaluation of assets.

Step-by-step explanation:

The correct option among the given statements is D: Under IFRS, companies must classify expenses by either nature or function. This is by IAS 1, which allows expenses to be categorized based on either their nature (such as raw materials, staffing costs, depreciation, etc.) or their function (such as cost of goods sold, selling, general and administrative expenses, etc.).

IFRS does not specifically prohibit the use of the multi-step income statement, nor does it require the use of the perpetual inventory method. Also, it does not prohibit the revaluation of land, buildings, and intangible assets; in fact, IFRS allows for revaluation of these assets under certain circumstances, as provided by IAS 16 for Property, Plant, and Equipment, and IAS 38 for Intangible Assets.