Abstract
Application of different inventory accounting methods would affect the financial statements, which will be responded by investors, thus affecting the market value of the company. This study is a replication of two previous studies Anisa (2004) and Wiryadi and Supatmi (2008) which have different results. This study wanted to retest the effect of the method of accounting for inventories on the company's market value. The hypothesis of this study is the method of average inventory accounting in the financial statements has more influence on the market value of the company compared to the FIFO accounting method. Hypothesis test is done using the test nonnested The discrimination approach and the discerning approach. The population in this study is the companies listed in the Stock Exchange in 2007 to 2009. The results of the 2 methods of testing hypotheses in this study showed different results. In testing using the discrimination approach of inventory accounting method more reflect the average market value than the FIFO method of inventory accounting. In contrast to the approach discerninig testing using the FIFO method of inventory accounting better reflect the company's market value. With the weakness in discrimination approach method of which models a simple ranking is only based on a model selection criterion and provide the highest value of election measures of goodness of fit, then the conclusions of this study using discerninig approach methods. So in this study proves that the FIFO method of inventory accounting in the financial statements more influence on the market value of the company compared with the method of average inventory accounting.
