Company A reports under IFRS and uses the FIFO method of inventory accounting. Company B reports under

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Company A reports under IFRS and uses the FIFO method of inventory accounting.

Company B reports under US GAAP and uses the LIFO method. Exhibit 7 gives data pertaining to current assets, LIFO reserves, and current liabilities of these companies.

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Based on the data given in Exhibit 7 , compare the liquidity of the two companies as measured by the current ratio.

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International Financial Statement Analysis CFA Institute Investment Series

ISBN: 9780470287668

1st Edition

Authors: Thomas R. Robinson, Hennie Van Greuning CFA, Elaine Henry, Michael A. Broihahn, Sir David Tweedie

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Question Posted: Feb 14, 2024 09:01 AM

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Company A reports under IFRS and uses the FIFO method of inventory accounting. Company B reports under

Question:

EXHIBIT 7 Data for Companies Accounting for Inventory on Different Bases Company A (FIFO) $300,000 $150,000 Current assets (includes inventory) LIFO reserve Current liabilities NA = not applicable. Company B (LIFO) $80,000 $20,000 $45,000

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Company As current ratio is 20 Based on unadjusted balance sheet data Company Bs current ratio is 17...View the full answer

International Financial Statement Analysis CFA Institute Investment Series

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