Use of the LIFO method has been deemed unacceptable under AASB 102 because:
A) It presents too many options to report preparers and may confuse them.
B) This method allows profits to be manipulated by purchasing items at year's end even though they have not been sold.
C) It can result in higher cost of goods sold figures and therefore lower taxes.
D) This method did reflect the actual physical flow of inventories.

Question

Quizplus · Accepted Answer

The LIFO (Last In, First Out) method can allow for profit manipulation by purchasing additional inventory at the end of the year. This can artificially lower the cost of goods sold (if prices are rising), thereby increasing profits without reflecting the actual economic reality of the business operations. This potential for manipulation is a key reason for its unacceptability under certain accounting standards, including AASB 102.

Use of the LIFO Method Has Been Deemed Unacceptable Under