- CFA Exams
- CFA Level I Exam
- Topic 4. Financial Statement Analysis
- Learning Module 2. Analyzing Income Statements
- Subject 2. Expense Recognition - Inventory
CFA Practice Question
Under U.S. GAAP, a company that uses the LIFO method to compute taxable income must use the ______ method for financial reporting.
B. average cost
C. LIFO
A. FIFO
B. average cost
C. LIFO
Correct Answer: C
The tax law requires that a company that uses LIFO for tax purposes also use LIFO for financial reporting purposes.
User Contributed Comments 4
| User | Comment |
|---|---|
| kalps | Clealry this is an important poitn as the question has been asked twice - LIFO for tax means must use LIFO for FR as well |
| cbb1 | LIFO is the only inventory method that if used for tax, must also be used for financial reporting. Otherwise, inventory methods can vary for book and tax. |
| sha09 | is it only U.S. that uses LIFO? IFRS banned use of LIFO.... |
| bablig | Thats right sha09 |