ACC 311 Class 12 PPT Ch 7 no notes

Replacement cost replacement replacement better

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Unformatted text preview: atches Better matches Better Better current costs in cost current costs in cost off goods sold with o goods sold with revenues. revenues. revenues. revenues. Smoothes out Smoothes out Smoothes Smoothes price changes. price changes. price price 7-12 International Perspective LIFO and International Comparisons While U.S. GAAP allows companies to choose between FIFO, LIFO, and weighted average inventory methods, International Financial Reporting Standards (IFRS) currently prohibit the use of LIFO. GAAP allows different inventory accounting methods to be used for different types of inventory items. IFRS requires that the same method be used for all inventory items that have a similar nature and use. These differences can create comparability problems when one attempts to compare companies across international borders. 7-13 Managers Choice of Inventory Methods Net Income Effects Net Income Effects Managers prefer to report Managers prefer to report Managers Managers higher earnings for their higher earnings for their companies. companies. companies. companies. Income Tax Effects Income Tax Effects Managers prefer to pay the Managers prefer to pay the Managers Managers lleast amount of taxes east amount of taxes allowed by law as late as allowed by law as late as possible. possible. possible. possible. LIFO Conformity Rule If last-in, first-...
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