Question

With respect to accounting for inventories, which of the following is a difference that exists for IFRS, as opposed to U.S. GAAP? There is required recognition of certain development costs. The FIFO method of inventories is prohibited. The specific identification method of inventories is only allowed when goods are interchangeable. The weighted average method of inventories is prohibited

Answer 1

Solution:

The correct option is “The specific identification method of inventories is only allowed when goods are interchangeable.”

Under US GAAP

- FIFO, LIFO, Specific Identification and weighted average cost methods are acceptable accounting method.

Under IFRS, with respect to Accounting for Inventories

- FIFO and Weighted Average Cost are acceptable accounting method for determining cost of Inventory

- LIFO method is not permitted.

- However under IFRS where the inventory items that are not ordinarily interchangeable and for goods or services produced and segregated for specific projects, the specific identification method is required for determining the cost of inventory.

Hence, the different that exists for IFRS, as opposed to US GAAP is “The specific identification method of inventories is only allowed when goods are interchangeable”

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