When disclosing the impact of a retrospective adjustment for the change from LIFO to FIFO in 2017, which of the following impacts is not expected to be reported in the comparative financial statements when two-year comparative statements are presented?
A) impact on beginning inventory for 2016
B) impact on 2016 net income
C) impact on ending inventory for 2017
D) impact on cost of goods sold for 2016

Question

Quizplus · Accepted Answer

When a company changes its inventory accounting method from LIFO (Last In, First Out) to FIFO (First In, First Out), the retrospective adjustment typically affects the beginning inventory and the cost of goods sold (COGS) for the prior period(s), as well as the net income for those periods. However, the impact on ending inventory for the year of the change (2017, in this case) is not expected to be reported as a retrospective adjustment in the comparative financial statements. This is because the ending inventory for 2017 would already reflect the FIFO method, as the change has been applied retrospectively.

When Disclosing the Impact of a Retrospective Adjustment for the Change