LIFO


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LIFO

Last In, First Out

In accounting, a technique for valuing inventory by treating inventory acquired most recently as if it were sold first. The sale of inventory is recorded against the purchase price of the most recently acquired inventory, even if the physical goods are not the same. In times of high inflation, the last-in, first out technique reduces a business' inflation risk. It also may reduce one's tax liability. For these reasons, most American firms have used this technique in their accounting since the 1970s.

LIFO

LIFO

  1. see REDUNDANCY.
  2. STOCK VALUATION.

Last In, First Out (LIFO)

An accounting method for valuing inventories for tax purposes. Under this method, the last items purchased are treated as being the first items sold. Ending inventory is valued using the cost of the items with the earlier purchase dates.
References in periodicals archive ?
Taxpayers that use LIFO for tax reporting purposes are allowed to issue financial statements on a basis other than LIFO only if they are for noncredit purposes and are not provided to shareholders or other owners.
LIFO associates the costs of the most recently acquired inventory with the inventory items sold (with the older inventory costs remaining on the balance sheet and reported as inventory on hand).
On the balance sheet, the use of the LIFO method tends to understate the value of a company's inventory.
Have a few ideas on LIFO and FIFO routing, or some other type of routing methodology?
But some experts think it will be politically easier for Congress to repeal LIFO now that the SEC announced its intention to require U.
Other studies include Dopuch and Pincus (1988), which examined the differences in accounting numbers and accounting ratios of users of LIFO and FIFO methods.
It's pretty hard to put in a heading for "FIFO" and then start discussing either LIFO or weighted average inventory methods.
A taxpayer wishing to adopt LIFO for tax purposes must file a formal application on Form 970 with a timely filed (including extensions of time to file) income tax return for the year of the election.
While average metals prices continued to fall through the third quarter, we were able to capture a 100 basis point improvement in gross margins, excluding LIFO, as a result of our strong inventory management," continued Lehner.
Thiel Machinery has used LIFO because, among other things, the reduced amount of profits meant the company paid significantly less in taxes, which has allowed it to reinvest a higher proportion of cash back into the business.
companies currently using it aren't eager to switch to international standards if the switch means incurring a sizable tax on the conversion from LIFO use.