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Inventory valuation

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Inventory valuation

  • This topic has 1 reply, 2 voices, and was last updated 3 weeks ago by John Moffat.
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  • September 1, 2023 at 12:12 pm #691116
    Sarara123
    Participant
    • Topics: 2
    • Replies: 2
    • ☆

    Hey! Can you please explain what is meant by the statement that lifo isn’t allowed in financial accounting. I mean do we not use the same values in both forms of accounting e.g, when we sell finished goods whatever we value them at, that value has to be the same in cost as well as financial accounting?

    September 1, 2023 at 4:17 pm #691141
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 53169
    • ☆☆☆☆☆

    The financial accounts are prepared for the benefit of external users (e.g. shareholders, lenders etc..) and have to be prepared in accordance with the rules laid down in the International Accounting Standards. LIFO is not allowed as a method of inventory valuation in the accounting standard on inventory.

    The management accounts are not the same thing at all. They are prepared only for the benefit of management and they can prepare them in whatever way they regard as being most useful for them and there are no rules that apply. Although they will prepare a profit statement, the format is unlikely to be the same as the financial profit statement, and they are less likely to produce the other statements that are prepared as part of the financial accounts. Do watch my free lecture going through Chapter 1 of our free lecture notes. (The lectures are a complete free course for Paper MA and cover everything needed to be able to pass the exam well).

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