Which of the following is not an acceptable method under IAS2/AASB102 for use in costing inventory? Group of answer choices First-in, first-out Specific identification Last-in, first-out Average cost
Question
Which of the following is not an acceptable method under IAS2/AASB102 for use in costing inventory? Group of answer choices
First-in, first-out
Specific identification
Last-in, first-out
Average cost
Solution
The Last-in, first-out (LIFO) method is not an acceptable method under IAS 2/AASB 102 for use in costing inventory.
Here's why:
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IAS 2 (International Accounting Standard 2) and AASB 102 (Australian Accounting Standards Board 102) are standards that provide guidance on the determination of the cost of inventories and their subsequent recognition as an expense.
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According to these standards, the cost of inventories shall be assigned by using the First-in, first-out (FIFO) or weighted average cost method. The use of the LIFO method is prohibited.
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The specific identification method is also acceptable when the items of inventory are not ordinarily interchangeable, and goods or services are produced and segregated for specific projects.
So, the LIFO method is not an acceptable method under IAS 2/AASB 102 for use in costing inventory.
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