Question: IFRS require that companies include overhead in inventory However different

IFRS require that companies include overhead in inventory. However, different companies can account for certain overhead costs differently. For example, in 2017, Companies A and B were identical in every respect except for how they accounted for $100,000 of overhead costs. Company A includes the $100,000 in the cost of inventory while Company B expenses the $100,000 as incurred. At the end of 2017, both companies had half the inventory they produced during the year on hand (which for Company A means that half the $100,000 of overhead is in inventory).
What is the impact on the following amounts of the two different treatments of the overhead costs?
a. Inventory at the end of 2017
b. Current assets at the end of 2017
c. Cost of goods sold and expenses in 2017
d. Net income for 2017

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  • CreatedFebruary 26, 2015
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