Chapter 6, Problem 6.2IFRS

To determine

Inventory turnover ratio:

Inventory turnover ratio is a financial measure that is used to evaluate as to how many times a company sells or uses its inventory, during an accounting period. It is calculated by using the following formula:

$\boxed{\text{Inventory turnover = }\frac{\text{Cost of goods sold}}{\text{Average inventory}}}$

Days’ sales in inventory: Days’ sales in inventory are used to determine number of days a particular company takes to make sales of the inventory available with them.

$\boxed{\text{Days' sales in inventory}=\frac{\text{Days in accounting period}}{\text{Inventory turnover}}}$

To Discuss: The effect of the differences in inventory accounting between IFRS and GAAP on inventory turnover ratio of the Incorporation L using IFRS and the company using GAAP.