Explaining multiple inventory methods at one real-world company
The following footnote related to accounting for inventory was taken from the 2008 annual report of Alcoa, Inc.
Inventory Valuation Inventories are carried at the lower of cost or market, with cost for a substantial portion of U.S. and Canadian inventories determined under the last-in, first-out (LIFO) method. The cost of other inventories is principally determined under the average-cost method. See Note G for additional information.
Write a brief report explaining the reason or reasons that best explain why Alcoa uses the LIFO cost flow method for its inventories kept in the United States and Canada, but the average cost method for its other inventories.
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