The following information is available for a manufacturing company:
| $ Millions | |
| Cost of ending inventory computed using FIFO | 4.3 |
| Net realizable value | 4.1 |
| Current replacement cost | 3.8 |
If the company is using International Financial Reporting Standards (IFRS) instead of US GAAP, its cost of goods sold (in millions) is most likely:
Under IFRS, the inventory would be written down to its net realizable value ($4.1 million), whereas under US GAAP, market value is defined as current replacement cost and thus would be written down to its current replacement cost ($3.8 million). The smaller write-down under IFRS will reduce the amount charged to the cost of goods sold compared with US GAAP and result in a lower cost of goods sold of $0.3 million.