PRC-1 · Chapter 7 · Question 52 of 100
Which of the following cost measurement formulas is explicitly NOT permitted under IAS 2 for valuing inventory?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Last in, First out (LIFO)
Explanation
IAS 2 explicitly prohibits the use of the LIFO formula because it generally matches current revenues with outdated, historical inventory costs, leading to distorted inventory valuations on the balance sheet.
More IAS 2: Inventories MCQs
- Q54How should fixed production overheads be allocated to inventory if the actual production level is abnormally low during a period?
- Q55How must the cost of abnormal wastage of materials and labor be treated under IAS 2?
- Q56On 31 December 2015, a company has partly-completed inventory with a cost to date of Rs. 26,300. It is expected that further costs of Rs…
- Q57Using the data from the previous question (Cost = Rs. 26,300, NRV = Rs. 36,600), at what value should this inventory be reported in the…
- Q58Which of the following is NOT a required disclosure for inventories under IAS 2?