Inventory Valuation and Management Decisions.

Abstract This article discusses a study on the management decisions based on accounting reports using a method of inventory valuation and the effects of inventory methods. The issues raised by current research on the effects of inventory valuation methods are not new. As alternative accounting methods have been proposed, developed, and put into use, the profession has always engaged in discussion of the relative advantages to be derived from a change in methods as well as the disadvantages, which accrue from diverse practice. Discussions of inventory valuation methods have been an important part of the accounting literature for many years, and there have been many serious attempts to ascertain the validity of arguments raised in support of particular methods or in opposition to them. The research methods used in previous studies have failed to provide conclusive evidence on the effects of alternative inventory methods on decisions. Differences in reported values resulting from the use of different methods have been demonstrated, but empirical support for conclusions about the effect of these differences on business decisions has not been obtained.