Describe a high-level difference between GAAP and IFRS in inventory costing.

• A. IFRS generally prohibits LIFO and uses lower of cost and NRV with some differences; GAAP allows LIFO and uses cost formulas that may differ in measurement.
• B. IFRS requires LIFO; GAAP prohibits LIFO.
• C. Both GAAP and IFRS prohibit the use of cost formulas like FIFO, LIFO, or weighted average.
• D. IFRS uses only weighted average method; GAAP uses only FIFO.

Answer: (A)

The main idea is that inventory costing under IFRS and GAAP differs in both the methods allowed and how inventory is measured. IFRS generally does not allow the LIFO method and uses lower of cost and NRV (net realizable value) as the measurement rule, with some differences in application. GAAP, on the other hand, allows LIFO and permits multiple cost formulas such as FIFO, LIFO, and weighted average, with its own measurement approach (historically described as lower of cost and market, which differs from NRV). This combination means IFRS and GAAP can produce different inventory values and cost of goods sold for the same company.

Why this choice fits best: it captures the high-level distinction that LIFO is prohibited under IFRS while allowed under GAAP, and that the measurement bases differ—NRV under IFRS versus the GAAP-inspired market approach (lower of cost and market) that interacts with the chosen cost formula. The other options are incorrect because IFRS does not require LIFO, both standards do not prohibit all cost formulas, and IFRS does not restrict to only weighted average while GAAP does not restrict to only FIFO.