Which statement regarding purchase accounting principles is incorrect?

The statement that Last-in, Last-out (LIFO) must always be used is incorrect because purchase accounting principles do not mandate the use of any specific inventory valuation method like LIFO. Instead, companies may choose from several acceptable methods, such as FIFO (First-in, First-out), weighted average cost, or LIFO, depending on what best suits their financial reporting and tax strategies.

In purchase accounting, the objective is to fairly represent the acquired entity's assets and liabilities as of the acquisition date. Other statements regarding purchase accounting principles are accurate: investment values, for instance, are typically adjusted annually to reflect changes in the financial position and performance of the investment. Additionally, assets acquired in a business combination are recorded at their fair market value, ensuring that the balance sheet reflects the actual worth of the assets at the time of acquisition. Similarly, liabilities are also recorded at fair value, providing a realistic picture of the obligations acquired. This treatment is consistent with the goal of presenting a true economic view of the transaction.