CFA Level I · CFA Level I Exam · Analysis of Inventories
A company reports under IFRS. Which of the following inventory cost flow methods is it least likely to be permitted to use?
LIFO is the method least likely to be permitted under IFRS. IFRS allows specific identification, FIFO and weighted average cost, but prohibits LIFO. US GAAP, by contrast, permits LIFO, which is why the distinction matters when comparing companies across the two frameworks.
- AWeighted average cost
- BFirst-in, first-out (FIFO)
- CLast-in, first-out (LIFO)Correct
Explanation
IFRS permits specific identification, FIFO and weighted average cost. LIFO is prohibited under IFRS, although it is allowed under US GAAP. Weighted average and FIFO are both acceptable.
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