Starfish Company (a company using GAAP and the LIFO inventory method) is considering changing to IFRS and
Question:
Starfish Company (a company using GAAP and the LIFO inventory method) is considering changing to IFRS and the FIFO inventory method. How would a comparison of these methods affect Starfish’s financials?
(a) During a period of inflation, working capital would decrease when IFRS and the FIFO inventory method are used as compared to GAAP and LIFO.
(b) During a period of inflation, the taxes will decrease when IFRS and the FIFO inventory method are used as compared to GAAP and LIFO.
(c) During a period of inflation, net income would be greater if IFRS and the FIFO inventory method are used as compared to GAAP and LIFO.
(d) During a period of inflation, the current ratio would decrease when IFRS and the FIFO inventory method are used as compared to GAAP and LIFO.
