Management's choice to use LIFO or FIFO can make a financial analyst's efforts to compare companies difficult.The financial analyst's job is made easier because of
A)the requirement that the financial statements and tax return must use the same inventory valuation methodology
B)the fact that most companies in an industry use the specific identification method
C)the use of the weighed average method
D)the disclosure of the "LIFO reserve"

Question

Quizplus · Accepted Answer

Disclosure of the "LIFO reserve" can help the financial analyst to adjust for the differences in LIFO and FIFO inventory valuations and make a more accurate comparison between companies. A and B are not necessarily true for all companies and industries, and C may not provide enough detail for comparison purposes.

Management's Choice to Use LIFO or FIFO Can Make a Financial