LIFO is prohibited by IAS 2; if used internally, inventories must be:

• A. A Revalued annually
• B. B Adjusted in the financial statements
• C. C Written off to zero
• D. D Valued using FIFO instead

Answer: (B)

IFRS requires inventories to be measured using a permitted cost formula, and LIFO is not allowed. If a company uses LIFO internally, the financial statements must present inventories using an allowed method, typically by remeasuring costs using FIFO (or weighted average). This adjustment ensures the reported inventory value and cost of goods sold align with IFRS requirements, providing faithful representation and comparability. Revaluing annually or writing off to zero aren’t mandated by this rule, and simply keeping LIFO in internal records isn’t acceptable for external reporting—the key is adjusting the figures in the financial statements to a compliant method.