INVENTORY

Question 1

LIFO

Answer 1

NOT ALLOWED

Question 2

Acceptable methods

Answer 2

Specific ID - for NOT interchangeable goods
FIFO
Weighted average
Retail - only for certain industries
Gross profit method - only when physical count not possible
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Question 3

How are inventories carried?

Answer 3

at lower of COST or NRV except

agricultural inventories and biological assets - carried at fair value less costs to sell

Question 4

GAAP vs. IFRS in the application of LCNRV

Answer 4

NRV = estimated selling price less estimated cost to sell

LCNRV is applied item by item basis
Items can be grouped if they have similar characteristics

Question 5

GAAP vs. IFRS on capitalization of interest

Answer 5

GAAP - interest for inventories routinely manufactured NOT ALLOWED

IFRS - also not allowed if paid under normal credit terms but ALLOWS IT if there is a lengthy production period