Accounting, Analysis, and Principles In preparation for significant international operations, ABC Co. has adopted a plan to gradually shift to the same accounting policies as used by its international competitors. Part of this plan includes a switch from average-cost inventory accounting to FIFO. ABC decides to make the switch to FIFO at January 1, 2015. The following data pertains to ABC’s 2015 financial statements.

All sales and purchases were with cash as were all of 2015’s compensation expense (ignore taxes). ABC’s plant, property, and equipment cost $400 and has an estimated useful life of 10 years with no residual value.
ABC Co. reported the following for fiscal 2014 (amounts are in millions).

Accounting Prepare ABC’s December 31, 2015, statement of financial position and an income statement for the year ended December 31, 2015. In columns beside 2015’s numbers, include 2014’s numbers as they would appear in the 2015 financial statements for comparative purposes.
Analysis Compute ABC’s inventory turnover for 2014 under both average-cost and FIFO. Assume averages are equal to year-end balances. What causes the differences in this ratio between average-cost and FIFO?
Principles Briefly explain, in terms of the policies discussed in Chapter 22, why IFRS requires that companies that change accounting policies present restated prior year’s financial statement data.

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Sales $550 Inventory purchases 12/31/15 Inventory (using FIFO) 350 580 Compensation expense 17