Question 8 Bryer Company has used the FIFO method of valuing its inventory for the prior...
Question 8
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Bryer Company has used the FIFO method of valuing its inventory for the prior 12 years. The accountants at Bryer Company would like to switch to LIFO since the economy is suffering from severe inflation. For the switch to occur
Bryer Company cannot make a change to its inventory valuation method once a method is chosen.
Bryer Company must remain consistent and keep LIFO in place for a minimum of 15 years.
Bryer Company must remain consistent with or without placing a note in the financial statements.
Bryer Company must remain consistent with or without auditor approval.
Bryer Company must have its auditor's approval and place a note in its financial statements, also, the auditor must refer to the change in its audit opinion.
Homework Answers
As per consistency principle of US GAAP, a company should follow the same accounting principle and method over a long period of time and avoid making frequent changes to it. However there is no such accounting standards which say that a company cannot change its inventory valuation method under any circumstances. It is desirable to follow the same method for long duration but to show better financial results or depending upon the situation, it may change the method applied. Such changes must be approved by the auditor and a note must be documented on the financial statement to comply with the disclosure principle.
Answer: Bryer Company must have its auditor's approval and place a note in its financial statements, also, the auditor must refer to the change in its audit opinion.
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Question 8
Bryer Company has used the FIFO method of valuing its inventory
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