U.S.GAAP and IFRS requires firms to use a cost-flow assumption that matches the actual physical flow of units within the firm.

Question

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While both U.S. GAAP and IFRS require firms to use a cost-flow assumption, neither requires that the cost-flow assumption match the actual physical flow of units within the firm. Instead, both allow firms to choose from various cost-flow assumptions, such as FIFO, LIFO, or weighted average, as long as the chosen method is consistently applied.

USGAAP and IFRS Requires Firms to Use a Cost-Flow Assumption