Cost Flow Assumption
Cost flow assumptions relate to how gods are removed from a company’s inventory and reflected in cost of goods sold. Apple uses the FIFO method, which assumes that the oldest item sold is the first one sold. The balance sheet for 2021 indicates an amount of 6.58 billion, showing an increase of more than 60% from the previous reporting period (Apple 34). Such figures indicate a stable preservation of demand and growth in sales. Apple chooses FIFO because the most recent items purchased reflect current market prices. In the context of creating a stir for new products from Apple, this inventory type is the most effective. FIFO is the most convenient tool for estimating cost, taking into account that the cost of inventory decreases, which is what happens to Apple when a company releases a new product.
Types if Inventories
Apple a few years ago switched to the development of stock levels. The two main types identified in the report include finished products and components that can be called ‘work in progress’ (Apple 34). This type of accountability allows the management to structure business processes and understand dynamics better. At Apple, both indicators are correlated with each other, giving an idea that the production has an established organization.
Reporting under IFRS
Most countries operate under International Financial Reporting Standards (IFRS). The standards allow the use of the FIFO method, but does not allow the LIFO approach. Under generally accepted accounting principles, GAAP, both approaches are legitimate. Since FIFO is a standardized procedure and can be chosen as an accounting approach, it is endorsed by IFRS. Therefore, Apple would not have to change its approach in any way if the inventory was carried out according to general IFRS standards.
Apple Inc. Form 10-K. United States Security and Exchange Commission, 2021, Web.