CFA Practice Question

There are 520 practice questions for this study session.

CFA Practice Question

Which of the following statements is not true in regard to the LIFO inventory cost flow assumption?
A. The LIFO cost flow assumption does not normally reflect the usual physical flow of inventory units.
B. For balance sheet purposes, the cost of inventory will approximate the current replacement cost under the LIFO assumption.
C. If a company uses LIFO for tax purposes, it must also use LIFO for external financial reporting purposes.
Explanation: Under LIFO, the inventory on the balance sheet will consist of older costs, usually from a previous period, and will not represent the latest costs.

User Contributed Comments 5

User Comment
turtle is the last choice really true? Besides if you can find one country where it is not true, the statement is false.
johnsk turtle: I think we should assume the US GAAP when dealing with accounting questions in our exam. This should be an implicit assumption otherwise every question of accounting is doubtful and does not have a correct answer!
MGM13 Yes. Assume US GAAP.
rjdelong IFRS does not allow LIFO, so GAAP is a given in this question
robertdole Actually. The CFA book states that we should assume it is IFRS unless they explicitly say "US GAAP"
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