LIFO Liquidation

LIFO Liquidation

A situation in which a company using LIFO accounting sells its oldest inventory. Under LIFO accounting, inventory purchased last is treated as if it is sold first. Thus, LIFO liquidation occurs when a company appears to sell the inventory it purchased first. This may not be the actual inventory it purchased first but is treated as such for accounting purposes. LIFO liquidation happens when the company's sales outpace its purchases for inventory.
References in periodicals archive ?
Often, LIFO layers are recorded at a lower cost than current purchases and LIFO liquidation via inventory reduction has the effect of lowering COGS and increasing income.
However, the absorption costing effect of lowering income, along with other implementation costs, is opposite to the LIFO liquidation effect of increasing income.
Further, and very significantly, the LIFO transgression is "buried" in prior layers, provided that a LIFO liquidation does not occur after the method change has been effected.
17) LIFO liquidations can always be "managed" to accommodate or mitigate undesirable tax consequences.
Included in Table 3 is the LIFO liquidation or reduction for 1993.