Writea 500- to 750-word response to the question below"LIFO has been used by Client X to value its...

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Writea 500- to 750-word response to the question below"LIFO has been used by Client X to value its inventories. Client X has contacted you for clarification and recommendations on how the use of the LIFO method to value its inventories will be impacted if a switch to financial statements prepared in compliance with IFRS will be made."

David · Accepted Answer

The US GAAP allowed the use of LIFO Method for the valuation of inventories. LIFO Method 
is accepted by IRS also for taxation purposes. IFRS prepared by IASB does not allow LIFO 
Method for the valuation of inventories. IAS- 2 on Inventory Valuation clearly requires the 
adoption of either FIFO Method or weighed Average Method. Although LIFO method is 
considered the best in the inflation scenario, still it does not find any place in the books which 
are prepared on the basis of historical cost accounting framework. When the statements are 
prepared under price level accounting or inflation accounting, LIFO is still considered as the best 
possible Method.  
 In all economies of the world there is price rise or inflation. LIFO Method ensures that cost of 
goods sold is maximized as the latest cost in assigned to the production and hence Gross profits 
are minimized.

Write a 500- to 750-word response to the question below "LIFO has been used by Client X to value its inventories. Client X has contacted you for clarification and recommendations on how the use of the...

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