Question

Companies using LIFO are required to disclose the amount at which inventory would have been reported had it used FIFO. Similarly, companies using FIFO are required to disclose what their inventory would have been if the company had used LIFO.
True / False.

Answer 1

Answer:

True

Explanation:

LIFO is in fact, only allowed to be used in the United States, because under the new IFRS (International Financial Reporting Standards), the used of LIFO has been prohibited.

The reason for this, is that LIFO inflates the value of inventory, because the (usually) lower cost of old inventory is what is reported.

This is why companies using LIFO are obliged to report the hypothetical value of the inventories had they used FIFO.