Much of the incomparability of financial statements between businesses can be traced to different accounting methods. The most striking differences occur in (1) inventory valuation (FIFO, weighted average, etc.) (2) depreciation (straight-line, sum-of-the-years'-digits, etc.) (3) capitalization versus expense of certain costs, eg. leases and developmentof natural resources (4) investments in common stock carried at cost, equity, and sometimes market (5) definition of discontinued operations and extraordinary items [Kieso and Weygandt,1982].
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