If a company were to choose one inventory valuation method in the current year, and then...

80.2K

Verified Solution

Question

Accounting

If a company were to choose one inventory valuation method inthe current year, and then decide in the following year to changeinventory valuation methods to a method that better approximatesthe company’s actual costs:
Would this be accounted for as a change in accounting estimateor a change in accounting principle?  (Provide the Codification reference foryour answer)
Where is the Example provided in the Codification thatillustrates the guidance for the retrospective application of achange from LIFO to FIFO (assuming it is practicable to determinethe cumulative effect of the change for all prior years)?  (Provide the Codification reference foryour answer)
ABC Company is a manufacturing company. Based on the criteriain the Codification, explain why each of the following items wouldor would not be included in Inventory Cost for ABC.  (Provide the Codification reference foryour answer)
Expenses incurred for marketing to sell ABC’s inventory
General & administrative expenses incurred by ABC that arenot clearly related to production
Normal freight charges paid by ABC to its suppliers forinventory items purchased
Abnormally high freight charges paid by ABC to its suppliersfor inventory items purchased

Answer & Explanation Solved by verified expert

4.0 Ratings (700 Votes)

1a Yes It is accounted as change in accounting policy because change in valuation method reflects the actual flow of inventories and hence provides reliable and more relevant information to the users of financial statement a An entity which is trading in goods not a manufacturer and is a regular user of IFRS from that year It has been using LIFO cost formula for determining inventories Now it decides to change the above accounting policy It wants to use FIFO Cost formula The change in policy is justified because change See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member