Question $1$

$(20$ Marks$)$

Inventory valuation allows a business owner to calculate its cost of sales and, thus, its profitability. Inventory can also be one of the largest current assets of a business. Inventory valuation, therefore, determines the financial position and valuation of a business. Overvaluation or undervaluation can create a misleading picture. There are various methods to value inventory, e$.$g$.$ specific identification, FIFO, weighted average cost method, etc. Research on the valuation methods mainly addresses the topic of whether the choice of the inventory valuation method matters or not and what could be the reasons behind a certain choice.

REQUIRED:

Discuss three inventory valuation methods that can be applied in terms of the International Financial Reporting Standards. In your discussion, examine when it is appropriate to use each of the methods. Include an example to illustrate how different inventory valuation methods may cause a difference in results and show any calculations.