Question: Onslow Ltd Onslow is a small public company trading on
Onslow Ltd. (Onslow) is a small public company trading on a Canadian stock exchange. Onslow's managers have a bonus plan that is based on net income and the managers believe that the amount of reported earnings is important for maintaining the company's stock price. Assume that whether Onslow uses FIFO or average cost will have a significant effect on reported earnings (FIFO earnings being higher) and the amount of assets it reports on its balance sheet. Discuss the issues that Onslow's management must consider when choosing between FIFO and average cost.
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