Discuss and answer two of the the questions or cases listed below in detail:

Select one of the following cases in full:

A. Can I Use Both LIFO and FIFO

Many countries around the world do not allow the use of the LIFO method. The harmonization of accounting standards across countries may require a compromise on the use of LIFO concepts. Some accountants in the U.S. are suggesting the use of a LIFO/FIFO system that would LIFO on the income statement and FIFO on the balance sheet. This method would not be a cost allocation method because in most cases it would not result in a clean allocation of cost of goods available for sale into ending inventory and cost of goods sold.

What theoretical arguments can be made in favor of this hybrid LIFO/FIFO system? One practical problem that would arise from using different methods for the income statement and the balance sheet is that the balance sheetwouldnt balance. How do you suggest solving this problem?

B. Inventory and COGS

In reviewing your eBook reading for this week, there are several questions that come to mind that each company needs to ask itself and answer sufficiently when it comes to inventories. One of the questions that needs consideration is: what goods and materials are to be included in the ending inventory? Another important question is at what price the company should charge the issue of inventories so that the correct cost of goods sold and the inventory value can be determined. Discuss in detail how to determine the various items that should be included in the ending inventory and the various cost-flow assumptions used to determine the cost of goods sold? What is the impact of each cost-flow assumption on the income of the company?

1. As you may know, the U.S. is currently working towards a convergence of accounting standards with IFRS. Are the approved methods of inventory valuation under IFRS the same as U.S. GAAP? Discuss.

2. What are the tax implications, if any, of choosing an inventory valuation approach?

3. How do (should) companies choose an inventory valuation method (i.e. LIFO, FIFO, weighted-average, specific-identification) to use? Why do companies even NEED to do this? What is the entire purpose anyway?

4. What are some mechanisms or techniques that management can employ to help prevent obsolescence of inventory?