Answer these questions 1-3

1. GAAP allows LIFO for financial reporting and the IRS allows it for taxes. However; the IRS has a conformity rule which states that a company that chooses to use LIFO for taxes MUST use it for financial reporting. International accounting (IFRS) does not allow LIFO to be used because of the distorted value LIFO presents as ending inventory on the balance sheet.

You are the head of the FASB, and the IRS has just announced that it is removing the conformity rule so that firms can use LIFO for taxes without having to use it for financial reporting. Do you remove LIFO (like the Europeans) for financial reporting or do you still permit it? Defend your answer.

2. UNDER GAAP, THE COSTS CONNECTED WITH DEFENDING A PATENT ARE CAPITALIZED (MADE PART OF THE PATENT) IF THE DEFENSE IS SUCCESSFUL AND EXPENSED IF UNSUCCESSFUL; WHILE INTERNATIONAL STANDARDS EXPENSE THE COSTS OF DEFENDING A PATENT WHETHER SUCCESSFUL OR NOT. CHOOSE ONE SIDE AND DEFEND IT.

3. FOR MOST ASSETS ON THE BALANCE SHEET WE USE EITHER HISTORICAL COST OR WE REDUCE THAT AMOUNT FOR DEPRECIATION OR IMPAIRMENTS; YET FOR INVESTMENTS WE USE FAIR VALUE. HOW DO YOU THINK WE SHOULD VALUE INVESTMENTS ON THE BALANCE SHEET? HISTORICAL COST, FAIR VALUE OR LCM LOWER OF HISTORICAL COST OR MARKET TO SHOW IMPAIRMENT? DEFEND YOUR ANSWER! ALSO IF YOU ARE NOT USING HISTORICAL COST WHERE SHOULD THE CHANGE IN VALUE GO? INCOME OR COMPREHENSIVE INCOME? DON'T FORGET CONSERVATISM AND THE REALIZATION PRINCIPLE IN YOUR ANSWER.