Management's choice to use LIFO or FIFO can make a financial analyst's efforts to compare companies difficult. The financial analyst's job is made easier because of the
A) requirement that the financial statements and tax return must use the same inventory valuation methodology
B) fact that most companies in an industry use the specific identification method
C) use of the weighted average method
D) disclosure of the LIFO reserve

Question

Quizplus · Accepted Answer

The disclosure of the LIFO reserve allows financial analysts to adjust the inventory and cost of goods sold (COGS) figures to make companies using different inventory accounting methods (like LIFO and FIFO) comparable. This adjustment helps in analyzing and comparing the financial statements of different companies more accurately.

Management's Choice to Use LIFO or FIFO Can Make a Financial