Financial Reporting and Analysis Q240
0. Following information is available for a manufacturing company:
| Cost of ending inventory computed using FIFO | $2.5 million |
| Net realizable value | $2.3 million |
| Current replacement cost | $2.1 million |
If the company uses IFRS instead of U.S. GAAP its cost of goods sold ($
millions) is most likely:
millions) is most likely:
- Option : B
- Explanation : Under IFRS, the inventory would be written down to its net realizable value (2.3 million) and cost of goods sold will increase by 0.2 million. Under U.S. GAAP, inventory is written down to its current replacement cost ($2.1 million) and cost of goods sold will increase by 0.4 million. End result is that under IFRS the cost of goods sold will be lower by 0.2 million.
