Question

Allowing firms to estimate rather than physically count inventory at interim (quarterly)periods is an example of a trade-off between___________.
a. verifiability and faithful representation.b. faithful representation and comparability.c. timeliness and verifiability.d. neutrality and consistency.

Answer 1

Answer:

The correct answer is (c)

Explanation:

The inventory management is an important task to avoid shortages against the demand. The physical count of inventory is hard and time taking which is why companies usually estimate the inventory rather than spending time to count it. This is the perfect example of a trade-off between timeliness and verifiability. It is a good trade-off because companies usually know the inventory levels.