Question

A change in inventory valuation method from FIFO to LIFO is a change in accounting principle and is handled retrospectively.

a-true
b-false

Answer 1

The statement is false as a change from FIFO to LIFO is treated prospectively, not retrospectively, according to FASB standards.

Step-by-step explanation:

False. A change in inventory valuation from FIFO (First-In, First-Out) to LIFO (Last-In, First-Out) is indeed a change in accounting principle, but it is not handled retrospectively. According to the Financial Accounting Standards Board (FASB), this type of change should be applied prospectively due to the impracticality of determining the effects of the change for prior periods. Therefore, the effect of changing from FIFO to LIFO is recognized in the period of change and future periods only, not retrospectively.