ACC M115 Lecture Notes - Lecture 21: Income Statement, Write-Off, Current Asset
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Current asset any impairment in the asset"s value be recognised in the period in which the impairment occurred, not later, when the asset is sold. Market value is used only if it is lower than cost. Total cost" is the sum of quantity times unit cost for all the inventory items. Specific identification" inventory items identified by serial numbers and other methods. The different cost flow assumptions allocate the available cost differently between the balance sheet valuation and the expense in the income statement. Because each assumption allocates the available inventory cost between the inventory asset and the cogs expense differently, the choice of assumption has an effect on both the income statement and the balance sheet. If purchase prices are falling, the positions of fifo and lifo reverse. The more cost prices rise or fall during a period, the larger the difference will be between the methods.
