Question
Many companies use the last-in, first-out (LIFO) cost flow assumption in the accounting for inventories. LIFO has a lot going for it in terms of
Many companies use the last-in, first-out (LIFO) cost flow assumption in the accounting for inventories. LIFO has a lot going for it in terms of tax savings and providing an income number that better reflects the gross profit associated with inventories with different historical costs. However, in the wake of international convergence discussions (LIFO is not permitted under IFRS) and tax policy debates (LIFO is one of a number of tax loopholes that if closed could help address our budget and deficit challenges), more companies are seriously considering the switch from LIFO to first-in, first-out (FIFO) or average-cost inventory methods.
What would be your arguments for and against the use of LIFO?
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