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 ?
Even though the statements were provided as required by an already existing letter of credit rather than to obtain new credit, the IRS considered maintaining a current credit relationship to fall under the definition of "credit purposes." 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.
Although IFRS has far more disclosure requirements than GAAP, companies following GAAP have disclosures on inventory classification, accounting policy, cost basis, and LIFO disclosure, if necessary.
public companies would not be allowed to use LIFO, unless the SEC provided a specific exception for this inventory accounting standard.
The focus of the adjustments will be the found in the LIFO reserve balance that the company reported because of its use of LIFO.
On the income statement, the use of the LIFO method typically overstates the cost of goods sold and thus understates gross profits, operating profits, and net profits.
Have a few ideas on LIFO and FIFO routing, or some other type of routing methodology?
This adjustment essentially represents the cumulative tax benefit the company obtained by using LIFO. For many companies, the Sec.
The authors studied a database from COMPUSTAT of 175 FIFO firms and 48 LIFO firms with respect to the eight above-mentioned factors.
Boyle noted that "repealing the LIFO method--which the Code has permitted for nearly seven decades--would adversely affect many business taxpayers by increasing their tax bills, potentially leading to a significant loss of U.S.-based jobs." He explained that the objective of LIFO is to permit taxpayers to properly match their current sales revenues with the current replacement costs and thereby compute--and pay taxes on--a meaningful gross profit amount.
LIFO has tested and assessed a vast range of people in the past year and surveys have illustrated that people with massive ability often have no commitment or drive, whereas there are average intellect staff who put in massive efforts to improve themselves and their colleagues.
LIFO adopts the reverse methodology, assuming that the last asset the company purchased is the first it uses.
Returning to that former assignment to discuss the methods of inventory costing: You would probably quickly identify FIFO, LIFO, weighted average, and specific identification.