Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

15. GAAP vs IFRS

GAAP vs. IFRS: Introduction

Financial Accounting

15. GAAP vs IFRS

GAAP vs. IFRS: Introduction

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Multiple Choice

According to GAAP, which of the following is true regarding the use of the LIFO (Last-In, First-Out) inventory costing method?

LIFO is not permitted under GAAP but is allowed under IFRS.

LIFO is not permitted under either GAAP or IFRS.

LIFO is permitted under GAAP but not under IFRS.

LIFO is permitted under both GAAP and IFRS.

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Verified step by step guidance

Understand the concept of LIFO (Last-In, First-Out): LIFO is an inventory costing method where the most recently purchased or produced items are assumed to be sold first, leaving older inventory as unsold.

Review the accounting standards: GAAP (Generally Accepted Accounting Principles) is the accounting framework used in the United States, while IFRS (International Financial Reporting Standards) is used internationally.

Analyze the compatibility of LIFO with GAAP: Under GAAP, LIFO is permitted as a valid inventory costing method, and many U.S. companies use it for tax benefits during periods of inflation.

Analyze the compatibility of LIFO with IFRS: IFRS does not permit the use of LIFO as an inventory costing method due to its potential to distort financial statements and reduce comparability across companies.

Conclude based on the analysis: The correct statement is that LIFO is permitted under GAAP but not under IFRS, as GAAP allows its use while IFRS prohibits it.