11. Management may choose any inventory costing method it desires as long as the cost flow assumption chosen is consistent with the physical movement of goods in the company.
12. The first-in, first-out (FIFO) inventory method results in an ending inventory valued at the most recent cost.
13. IFRS requires that the cost flow assumption be consistent with the physical movement of the goods.
14. The specific identification method of inventory valuation is desirable when a company sells a large number of low-unit cost items.
15. If a company has no beginning inventory and the unit cost of inventory items does not change during the year, the value assigned to the ending inventory will be the same under FIFO and average cost flow assumptions.
16. If the unit price of inventory is increasing during a period, a company using the average-cost inventory method will show less gross profit for the period, than if it had used the FIFO inventory method.
17. If a company has no beginning inventory and the unit price of inventory is increasing during a period, the cost of goods available for sale during the period will be the same under the average-cost and FIFO inventory methods.
18. Use of the FIFO inventory valuation method enables a company to report higher net income when in a period of falling prices.
19. If a company changes its inventory valuation method, the effect of the change on net income should be disclosed in the financial statements.
20. In a period of rising prices, if a company uses the FIFO cost flow assumption, income tax expense will be lower than if they used average-costing.