Financial Reporting And Analysis MCQ - Financial Reporting And Analysis Section 2

91 Which of the following is most likely to be a financial statement disclosure required by IFRS concerning inventory?

A
The accounting policies used to measure inventory must be provided, but disclosure of the cost formula is optional.
B
The disclosure of accounting policies used to measure inventory is optional, but the cost formula must be provided.
C
The accounting policies used to measure inventory and the cost formula must be disclosed.

Under both IFRS and US GAAP, the accounting policies used to measure inventory and the cost formula must be disclosed.

92 Which of the following is least likely to be a financial statement disclosure required by IFRS concerning inventory?

The disclosure required by IFRS is the carrying amount of inventory at fair value minus costs to sell.

93 Reversal of prior-year inventory write-downs are most likely permitted under:

Reversal of prior-year inventory write-downs are permitted under IFRS but not under U.S. GAAP.

94 Which of the following is least likely correct about the measurement of inventory value under U.S.GAAP?

Reversal of write downs are prohibited under U.S. GAAP and permitted under IFRS.

95 Which ratio is most likely higher for a company using FIFO method to account for inventory, during a period of rising prices, when compared against a company using weighted average cost method?

In periods of rising prices FIFO results in a higher inventory value and a lower cost of goods sold and therefore a higher net income. The higher net income increases return on sales. The higher reported net income also increases retained earnings, and therefore results in a lower debtto-equity ratio not a higher one. The combination of higher inventory and lower cost of goods sold decreases inventory turnover (CGS/inventory).